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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the Fiscal Year Ended September 30, 2002.

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file No. 001-13615

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RAYOVAC CORPORATION

(Exact name of registrant as specified in its charter)

Wisconsin(State or other jurisdiction of
incorporation or organization)

22-2423556(I.R.S. Employer
Identification Number)601 Rayovac Drive(Address of principal executive offices)

53711-2497(Zip Code)


Registrant's telephone number, including area code: (608) 275-3340

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on
which registeredCommon Stock, Par Value $.01

New York Stock Exchange, Inc.


Securities registered pursuant to Section 12(g) of the Act:None

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes ý    No o

On
March 28, 2002, the aggregate market value of the voting stock held by non-affiliates of the registrant was $414,944,914. As of December 9, 2002, there were
outstanding 32,531,665 shares of the registrant's Common Stock, $0.01 par value.

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TABLE OF CONTENTS



|         |  |                                                                                      
|-------- |  | -------------------------------------------------------------------------------------
|PART I  
|ITEM 1.  |  | BUSINESS                                                                             
|ITEM 2.  |  | PROPERTIES                                                                           
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                    
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II 
|ITEM 5.  |  | MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS            
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                              
|ITEM 7.  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|ITEM 9.  |  | CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  
|PART III
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                   
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                               
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                       
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                       
|ITEM 14. |  | CONTROLS AND PROCEDURES                                                              
|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                     
|         |  | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE          
|         |  | SIGNATURES                                                                           

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PART I

ITEM 1. BUSINESS

General

Rayovac Corporation is the leading value brand manufacturer of general alkaline batteries in the U.S. We are also the leading worldwide manufacturer of hearing
aid batteries and the leading manufacturer of zinc carbon household batteries marketed in North America and Latin America. In addition, we are a leading marketer of rechargeable batteries and
battery-powered lighting products in the U.S. The RAYOVAC brand name enjoys broad recognition in the battery industry and was first used as a trademark for batteries more than 80 years ago. We
became a Wisconsin corporation in 1986.

On
October 1, 2002, we completed our acquisition of the consumer battery business of VARTA AG ("VARTA") for an aggregate purchase price, before acquisition related expenses, of
approximately 262 million Euros ($258 million U.S. based on exchange rates on October 1, 2002). VARTA is the leading European-based battery manufacturer of general batteries, is the market
leader in Germany and holds strong market positions elsewhere on the European continent and in Colombia and Mexico. Our acquisition consisted of the purchase of all of VARTA's consumer battery
subsidiaries and business outside of Germany and a majority interest in a new joint venture entity that will operate the VARTA consumer battery business in Germany. The acquisition did not include
VARTA's Brazilian joint venture, Microlite, SA, nor did it include VARTA's automotive and micropower battery businesses. As the closing of the VARTA transaction took effect after the close of our
fiscal year 2002, we generally do not refer to these events or their effects in this Annual Report except where specifically noted.

Products

We develop, manufacture and/or market a wide variety of batteries and battery-powered lighting devices. Our broad line of products includes general batteries,
hearing aid batteries, specialty batteries

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and lighting products and lantern batteries. A description of our major battery products and their typical uses is set forth below.

|                       
|-----------------------
|
|                       
|Technology:            
|                       
|Types/Common Name:     
|                       
|Brand; Sub-brand Names:
|                       
|Sizes:                 
|                       
|Typical Uses:          
|                       

Net sales data for our products as a percentage of net sales for each of fiscal 2000, fiscal 2001 and fiscal 2002 is set forth below.

Percentage of Company
Net Sales
Fiscal Year Ended
September 30,Product Type2000

2001

2002Battery Products:Alkaline

44.5
%
49.2
%
51.6
%Heavy Duty

22.6

22.6

16.9Rechargeables

4.7

4.8

5.6Hearing Aid

9.6

10.6

11.8Specialty Batteries

6.6

2.9

2.7Total

88.0

90.1

88.6Lighting Products and Lantern Batteries

12.0

9.9

11.4Total

100.0
%
100.0
%
100.0
%


General Batteries.Our general batteries category includes alkaline, heavy duty, rechargeable alkaline and nickel metal
hydride batteries ("NiMH"), and chargers for rechargeable batteries. We market a full line of alkaline batteries (D, C, AA, AAA and 9-volt sizes) for both consumers and

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industrial customers. Our alkaline batteries are marketed and sold primarily under the MAXIMUM PLUS brand, although we also engage in limited private label manufacturing of alkaline batteries. Our
heavy duty batteries are designed for low and medium-drain battery-powered devices such as flashlights.

During
fiscal 2002, we announced the development of our revolutionary new I-C3 rechargeable technology. The patent-pending I-C3 (In-Cell Charge
Control) technology puts the control of recharging into the NiMH battery, instead of the charger, resulting in a system capable of recharging NiMH batteries in as little as 15 minutes. We also offer
our RENEWAL rechargeable alkaline battery, which is the leading rechargeable alkaline battery in the U.S. market. RENEWAL batteries can be recharged up to 100 times, providing many times the life of
disposable alkaline batteries.

Hearing Aid Batteries.We are currently the largest worldwide seller of hearing aid batteries. Our RAYOVAC ULTRA zinc air
hearing aid battery is the world's longest-lasting hearing aid battery in the most commonly-used battery sizes. We also sell hearing aid batteries under other brand names and under several
private labels, including Beltone, Miracle Ear, Siemens and Starkey.

Specialty Batteries.Our specialty battery products include non-hearing aid button cells, lithium coin cells,
photo batteries and keyless entry batteries. We market button and coin cells for use in watches, cameras, calculators, communications equipment and medical instrumentation. Our lithium coin cells
are high-quality lithium batteries with certain performance advantages over other lithium battery systems and are marketed for use in calculators and personal computer clocks and memory
back-up systems.

Lighting Products and Lantern Batteries.We are a leading marketer of battery-powered lighting products, including
flashlights, lanterns and similar portable devices for the retail and industrial markets.

Operating Segments

Our business is organized and managed according to three geographic regions: (1) North America, which includes the U.S. and Canada; (2) Latin
America, which includes Mexico, Central America, South America and the Caribbean; and (3) Europe and the rest of the world (which we refer to as "Europe/ROW"), which includes the United
Kingdom, continental Europe and all other countries in which we do business. Global and geographic strategic initiatives and financial objectives are determined at the corporate level. Each operating
segment is responsible for implementing the defined strategic initiatives and achieving the financial objectives. Each geographic region has a manager responsible for all the sales and marketing
initiatives for all product lines within that region.

Financial
information pertaining to our operating segments is contained in Note 12 of the Notes to Consolidated Financial Statements filed with this report and is incorporated
herein by reference. Financial information pertaining to our foreign and domestic operations is also set forth in Note 12 of the Notes to Consolidated Financial Statements filed with this
report, and is incorporated herein by reference.

Sales and Distribution

North America.We align our internal sales force by distribution channel. We maintain separate sales forces primarily to
service (1) our retail sales and distribution channels and (2) our hearing aid professionals, industrial distributor and original equipment manufacturer sales and distribution channels.
In addition, we use a network of independent brokers to service participants in selected distribution channels.

We
have established our position as the leading value brand manufacturer in the North American general alkaline battery market by focusing on mass merchandisers. Over the last several
years, we have

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further penetrated the mass merchandiser channel while broadening our business in other distribution channels to include home centers; warehouse clubs; food, drug and convenience stores; electronic
specialty stores and department stores; hardware and automotive centers; specialty retailers; hearing aid professionals; industrial distributors; government agencies; and original equipment
manufacturers. Only Wal-Mart Stores, Inc. accounted for more than 10% of our consolidated net sales in fiscal year 2002 (26%). Our sales to Wal-Mart Stores, Inc. primarily
occur in North America.

Latin America.We align our internal sales force by distribution channel. We maintain two separate sales groups: one group
that directly services large retailers and food and drug chains located mainly in urban areas and a second group that services through distributors and wholesalers, secondary channels (such as photo,
grocery, hardware and stationary), industrial and other retailers located in both urban and rural areas. This sales structure enables us to focus on the rapid expansion of the alkaline category while
consolidating our leadership position in the heavy duty category.

Europe/ROW.We maintain a separate sales force in Europe to promote the sale of all of our products. We have adopted the
strategies, programs and category management expertise used in our North American business in our European business.

Raw Materials

Zinc powder, electrolytic manganese dioxide powder and steel are the most significant raw materials we use to manufacture batteries and a number of worldwide
sources of such materials exist. We believe we will continue to have access to adequate quantities of these materials at competitive prices.

Technology, Patents and Trademarks

Our success and ability to compete depends, in part, upon our technology and the protection of our intellectual property rights. We rely upon a combination of
methods to establish and protect our technology and other intellectual property rights, such as our own research and development activities, the purchase of third-party technology, intellectual
property laws, technology licenses, confidentiality agreements and other contractual covenants.

In
fiscal 2002, in addition to ongoing alkaline and hearing aid developments, we focused on our NiMH battery technology, which resulted in the development of our revolutionary new
I-C3 rechargeable technology. Our research and development group is comprised of approximately 100 employees. We enhance our internal research and development efforts by purchasing or
licensing state-of-the-art manufacturing technology from third parties. In fiscal 2002, 2001 and 2000, we invested $13.1 million, $12.2 million and
$10.8 million, respectively, on research and development. The U.S. government also funds some of our research and development expenditures.

We
own or license from third parties a considerable number of patents and patent applications throughout the world, primarily for battery product improvements, additional features and
manufacturing equipment. We license alkaline battery designs, technology and manufacturing equipment (and related updates and innovations) from Matsushita Battery Industrial Co., Ltd. through
March 2003, after which time we may license the designs, technology and manufacturing equipment as it exists at that date through March 2022. We also obtained a non-exclusive
license to use certain technology underlying our rechargeable alkaline battery line to manufacture rechargeable alkaline batteries in the U.S., Puerto Rico and Mexico and to sell and distribute
batteries worldwide based on this licensed technology. This license terminates in 2015.

We
also use a number of trademarks in our business, including RAYOVAC, MAXIMUM, MAXIMUM PLUS, RENEWAL, LOUD 'N CLEAR, PROLINE, RAYOVAC ULTRA, WORKHORSE, ROUGHNECK, SPORTSMAN, AIR 4000,
XCELL, EXTRA and AIRPOWER. We

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rely on both registered and common law trademarks in the U.S. to protect our trademark rights. The RAYOVAC mark is also registered in countries outside the U.S., including Europe, Latin America and
Asia. We do not have any right to the trademark RAYOVAC in Brazil, where an independent third-party battery manufacturer owns the mark.

Competition

In the markets for our products, companies compete for consumer acceptance and limited shelf space based upon brand name recognition, perceived quality, price,
performance, product packaging and design innovation, as well as creative marketing, promotion and distribution strategies. We believe the markets for our products are highly competitive.

Our
primary competitors in the U.S. are Duracell International, Inc., a subsidiary of The Gillette Company, and Energizer Holdings, Inc. Both of our competitors have
greater financial and other resources and greater overall market share than we do. They have committed significant resources to protect their own market shares or to capture market share from us in
the past and may continue to do so in the future. Private label offerings by major retailers are also a source of competition.

Internationally,
the general battery market is as highly competitive as the U.S. market with a greater number of competitors. Competition is primarily based upon pricing, product
performance, promotion and distribution strategies.

Seasonality

Sales of our products are seasonal, with the highest sales typically occurring in the first fiscal quarter ending on or about December 31, during the
holiday season. Our lowest sales occur in the fiscal quarter ending on or about March 31. For a more detailed discussion of the seasonality of our product sales, see "Management's Discussion
and Analysis of Financial Condition and Results of OperationsSeasonal Product Sales."

Governmental Regulations and Environmental Matters

Due to the nature of our operations, our facilities are subject to a broad range of federal, state, local and foreign legal and regulatory provisions relating to
the environment, including those regulating the discharge of materials into the environment, the handling and disposal of solid and hazardous substances and wastes and the remediation of contamination
associated with releases of hazardous substances at our facilities. We believe that compliance with the federal, state, local and foreign regulations to which we are subject will not have a material
effect upon our capital expenditures, earnings and competitive position. See Item 3 ("Legal Proceedings") for additional information regarding environmental matters.

Employees

As of September 30, 2002, and prior to closing of the VARTA transaction, we had approximately 2,480 full-time employees.

Available Information

Our Internet website is http://www.rayovac.com and you may access, free of charge, through the Investor Relations portion of our website our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

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ITEM 2. PROPERTIES

The following table lists our primary manufacturing, packaging, and distribution facilities, including those which were part of the acquisition of the consumer
battery business of VARTA as further described in Item 1.

|              |  | Manufacturing                                                           |  | Packaging and Distribution                                          
|------------- |  | ----------------------------------------------------------------------- |  | --------------------------------------------------------------------
|North America |  | Fennimore, Wisconsin
Portage, Wisconsin                                 |  | Madison, Wisconsin(1)
Middleton, Wisconsin(1)
Dixon, Illinois(1),(2)
|Europe/ROW    |  | Dischingen, Germany(3)
Breitenbach, France(3)
Washington, UK(2)         |  | Ellwangen, Germany(3)                                               
|Latin America |  | Guatemala City, Guatemala
Manizales, Colombia(3)
Mexico City, Mexico(4) |  |                                                                     

We
also own and/or operate distribution centers, sales offices, and administrative offices throughout the world in support of our business. Our administrative headquarters and our
primary research and development facility are located in Madison, Wisconsin(2).

We
continually evaluate our facilities' capacity and related utilization. As a result of such analyses, we have closed a number of manufacturing facilities during the past five years. We
believe our existing facilities, in general, are adequate for our present and currently foreseeable needs.

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ITEM 3. LEGAL PROCEEDINGS

We are subject to litigation from time to time in the ordinary course of business. Although the amount of any liability with respect to such litigation cannot
currently be determined, other than the matters set forth below, we are not party to any pending legal proceedings which, in the opinion of management, are material to our business or financial
condition.

Our
facilities are subject to a broad range of federal, state, local and foreign laws and regulations relating to the environment, including those governing discharges to the air and
water and land, the handling and disposal of solid and hazardous substances and wastes, and the remediation of contamination associated with releases of hazardous substances at our facilities and at
off-site disposal locations. We have a proactive environmental management program that includes the use of periodic environmental audits to detect and correct practices that may violate
environmental laws or that are inconsistent with best management practices. Based on information currently available to our management, we believe that we are substantially in compliance with
applicable environmental regulations at our facilities. There are no pending proceedings against us alleging that we are or have been in violation of environmental laws, and we are not aware of any
such proceedings contemplated by governmental authorities. We are, however, subject to certain proceedings under CERCLA or analogous state laws, as described below.

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We
have from time to time been required to address the effect of historic activities on the environmental condition of our properties, including without limitation, the effect of
releases from underground storage tanks. Several of our facilities have been in operation for decades and are constructed on fill that includes, among other materials, used batteries containing
various heavy metals. We have accepted a deed restriction on one such property in lieu of conducting remedial activities, and may consider similar actions at other properties, if appropriate. Although
we are currently engaged in
investigative or remedial projects at a few of our facilities, we do not expect that such projects will cause us to incur material expenditures.

Our
former manganese processing facility in Covington, Tennessee was accepted into TDEC's Voluntary Cleanup, Oversight and Assistance Program in February 1999. Under Tennessee's
voluntary cleanup program, we negotiated a Consent Order and Agreement with the TDEC, dated February 12, 1999, covering investigation, and if necessary, remediation of the facility. Groundwater
monitoring conducted with respect to a capped non-hazardous landfill at the facility, and groundwater testing beneath former process areas of the facility, indicated elevated levels of
certain inorganic contaminants, particularly (but not exclusively) manganese, in the groundwater underneath the facility. We have completed closure of lagoons on the property and have completed the
remediation of a stream that borders the facility.

Upon
successful completion of the requirements of the Consent Order and Agreement, we expect that no further action will be required at the facility. While remediation costs are
uncertain at this time, we do not expect the matter to have a material adverse financial impact on us.

In
addition, on February 9, 2001, the Wisconsin Department of Natural Resources approved our request to proceed under Wisconsin's Voluntary Party Liability Exemption program to
investigate and, if necessary, remediate environmental matters at our Wonewoc, Wisconsin, manufacturing facility. Investigative work to date suggests there may be battery materials containing various
heavy metals in fill on the property. However, we do not expect this matter to result in material expenditures.

We
are also subject to proceedings related to our disposal of industrial and hazardous waste at off-site disposal locations, under CERCLA or analogous state laws that hold
persons who "arranged for" the disposal or treatment of such substances strictly liable for the costs incurred in responding to the release or threatened release of hazardous substances from such
sites. Current and former owners and operators of such sites, and transporters of waste who participated in the selection of such sites, are also strictly liable for such costs. Liability under CERCLA
is "joint and several," so that a responsible party under CERCLA theoretically may be held liable for all of the costs incurred at a particular site. However, as a practical matter, liability at such
sites generally is allocated among all of the viable responsible parties. Some of the most significant factors for allocating liabilities to persons that disposed of wastes at Superfund sites are the
relative volume of waste such persons sent to the site and the toxicity of such waste. We do not believe that any of our pending proceedings under CERCLA or analogous state laws will have a material
impact on our operations, financial condition or liquidity, and we are not aware of any such matters contemplated by governmental agencies that will have such an impact.

As
of September 30, 2002, we have reserved approximately $1.6 million for known on-site and off-site environmental liabilities. We believe these
reserves are adequate, although there can be no assurance that this amount will ultimately be adequate to cover such environmental liabilities. We may also be named as a potentially responsible party
at additional sites in the future, and the costs associated with such additional or existing sites may be material. In addition, certain of our facilities have been in operation for decades and, over
such time, we and other prior operators of such facilities have
generated and disposed of wastes resulting from the battery manufacturing process which are or may be considered hazardous, such as cadmium and mercury.

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On
April 11, 2001, Eveready Battery Company, Inc. filed a complaint against us in U.S. District Court for the Northern District of Ohio, Eastern Division, alleging that we
have infringed on a patent held by Eveready relating to alkaline batteries that are substantially free of mercury. We were served with the complaint in August 2001. Eveready is seeking
injunctive relief as well as treble damages and other costs and expenses. We have answered the complaint and have denied all material allegations as we believe we have meritorious defenses. Since this
lawsuit commenced, we have vigorously defended our position. We cannot estimate at this time the effect, if any, that this claim may have on our business or financial condition.

On
May 31, 2002, a plaintiff represented by the law firm of Milberg Weiss Bershad Hynes & Lerach filed a class action lawsuit in the United States District Court for the
Western District of Wisconsin against defendants Rayovac Corporation and several of its current and former executive officers and directors alleging that the defendants violated Sections 11, 12(a)(2)
and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder(Eli
Friedman v. Rayovac Corporation, Kenneth V. Biller, Kent J. Hussey, David A. Jones, Scott A. Schoen, Stephen P. Shanesy, Thomas R. Shepherd,
Randall J. Steward, Warren C. Smith, Jr., and Merrell Tomlin,Case No. 02 C 0308 C, United States District Court, Western District of Wisconsin). The
complaint alleges that defendants made various false and misleading statements which had the alleged effect of artificially inflating the price of Rayovac stock during the period from April 26,
2001 until September 19, 2001. Substantially similar lawsuits were subsequently filed on June 11, 2002(Richard Slatten v. Rayovac Corporation,
Kenneth V. Biller, Kent J. Hussey, David A. Jones, Scott A. Schoen, Stephen P. Shanesy, Thomas R. Shepherd, Randall J. Steward, Warren C.
Smith, Jr., and Merrell Tomlin,Case No. 02 C 0325 C, United States District Court, Western District of Wisconsin) and on June 28, 2002 (David Hayes v. Rayovac Corporation,
Kenneth V. Biller, Kent J. Hussey, David A. Jones, Scott A. Schoen, Stephen P. Shanesy,
Thomas R. Shepherd, Randall J. Steward, Warren C. Smith, Jr., Merrell Tomlin, and Luis Cancio02 C 0308 C, United States District Court, Western District
of Wisconsin) Rayovac and the individual defendants have not yet answered these complaints, but they intend to deny all material allegations and vigorously defend themselves in these actions.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Shareholders of the Company was held on July 24, 2002. The directors standing for election were elected in an uncontested election.
The directors elected were David A. Jones and Barbara S. Thomas. Mr. Jones received 26,979,326 votes in favor of his election and 1,874,132 votes were withheld. Ms. Thomas received
27,184,028 votes in favor of her election and 1,669,430 votes were withheld. In addition to the election of directors, the Company submitted the ratification of the appointment of KPMG LLP as our
independent auditors to a vote of the shareholders. The vote in favor of ratification was: For: 27,306,114; Against: 1,540,507; Abstained: 6,837.

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PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock, $0.01 par value per share (the "Common Stock"), is traded on the New York Stock Exchange (the "NYSE") under the symbol "ROV". The Common Stock
commenced public trading on November 21, 1997. As of November 30, 2002, there were approximately 279 holders of record of Common Stock based upon data provided by the transfer agent for
the Common Stock. The following table sets forth the reported high and low prices per share of the Common Stock as reported on the New York Stock Exchange Composite Transaction Tape for the fiscal
periods indicated:

High

LowFiscal 2002Quarter ended December 30, 2001

$
18.05

$
13.60Quarter ended March 31, 2002

$
17.93

$
12.81Quarter ended June 30, 2002

$
19.10

$
14.80Quarter ended September 30, 2002

$
18.52

$
11.75Fiscal 2001Quarter ended December 31, 2000

$
18.81

$
11.69Quarter ended April 1, 2001

$
20.78

$
13.63Quarter ended July 1, 2001

$
25.25

$
16.93Quarter ended September 30, 2001

$
23.50

$
12.60


We
have not declared or paid and do not anticipate paying cash dividends in the foreseeable future, but intend to retain any future earnings for reinvestment in our business. In
addition, the terms of our credit facility restrict our ability to pay dividends to our shareholders. Any future determination to pay cash dividends will be at the discretion of the Board of Directors
and will be dependent upon our financial condition, results of operations, capital requirements, contractual restrictions and such other factors as the Board of Directors deems relevant.

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ITEM 6.    SELECTED FINANCIAL DATA

The following selected historical financial data is derived from our audited consolidated financial statements. Only the most recent three fiscal years audited
statements are included elsewhere in this Annual Report on Form 10-K. The following selected financial data should be read in conjunction with our consolidated financial statements
and the information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein.

|                                                            |         | Fiscal Year Ended September 30,
|----------------------------------------------------------- | ------- | -------------------------------
|
|
|Statement of Operations Data:                               |         |                                
|Net sales(1)                                                |         | $                              
|Gross profit(1)                                             |         |                                
|Income from operations                                      |         |                                
|Income before income taxes and extraordinary item           |         |                                
|Income before extraordinary item                            |         |                                
|Net income(2)                                               |         |                                
|Per Share Data:                                             |         |                                
|Income per common share before extraordinary item:          |         |                                
|                                                            | Basic   |                                
|                                                            | Diluted |                                
|Net income per share:                                       |         |                                
|                                                            | Basic   |                                
|                                                            | Diluted |                                
|Average shares outstanding:                                 |         |                                
|                                                            | Basic   |                                
|                                                            | Diluted |                                
|Impact of Unusual Items within the Statement of Operations: |         |                                
|Income from operations                                      |         | $                              
|Special charges within gross profit(3)                      |         |                                
|Special charges within operating expenses(4)                |         |                                
|                                                            |         |                                
|                                                            |         | Total unusual items            
|                                                            |         |                                
|Income from operations before unusual items                 |         | $                              
|                                                            |         |                                
|Cash Flow and Related Data:                                 |         |                                
|Cash flow from operating activities                         |         | $                              
|Capital expenditures                                        |         |                                
|EBITDA(5)                                                   |         |                                
|EBITDA before unusual items(5)                              |         |                                

|                     |  | September 30,
|-------------------- |  | -------------
|
|Balance Sheet Data:  |  |              
|Working capital      |  | $            
|Total assets(1)      |  |              
|Total long-term debt |  |              
|Total debt           |  |              

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Fiscal Year Ended September 30,1998

1999

2000

2001

2002EBITDA

$
53.0

$
67.4

$
108.6

$
74.5

$
80.8Total unusual items


6.2


9.4





22.3


1.2EBITDA before unusual items

$
59.2

$
76.8

$
108.6

$
96.8

$
82.0


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion of the financial results, liquidity, and other key items related to the Company's performance. This section should be
read in conjunction with the "Selected Financial Data", and our Consolidated Financial Statements and related notes in the "Financial Statements" section of this report. Certain prior year amounts
have been reclassified to conform to current year
presentation. All references to 2000, 2001, 2002, and 2003 refer to fiscal year periods ended September 30, 2000, 2001, 2002, and 2003, respectively.

INTRODUCTION

Rayovac Corporation is one of the oldest battery companies in the United States, founded in 1906 as the French Battery Company. Rayovac's product portfolio
includes alkaline, rechargeable, and heavy duty batteries, hearing aid batteries, lighting products, and other specialty batteries.

Our
financial performance is influenced by a number of factors including: general economic conditions and trends in consumer markets; our overall product line mix, including sales prices
and gross margins which vary by product line; and our general competitive position, especially as impacted by our competitors' promotional activities and pricing strategies. These influencing factors
played significant roles in our financial results during 2000, 2001 and 2002.

We
manage our business based upon three geographic regions. The regions are as follows: North America, which includes the United States and Canada; Latin America, which includes Mexico,
Central America, South America and the Caribbean; and Europe/Rest of World ("Europe/ROW"), which includes the United Kingdom, continental Europe and all other countries in which we do business.

Set
forth below are other significant developments that have impacted our results and may continue to affect our performance.

13

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Continued Manufacturing Cost Reduction Initiatives

We continually assess our worldwide manufacturing capacity and product costs in light of existing and forecasted market demand. With our continued focus on cost
reduction and rationalization, we believe we can continue to drive down our cost of goods manufactured with continued focus on cost reduction initiatives.

In
furtherance of this goal, we closed our Wonewoc, Wisconsin plant during 2001 and now source lighting products previously made at this plant from third party suppliers. With this
closure, we now outsource all of our lighting products.

Similarly,
we closed our zinc carbon battery plants in Tegucigalpa, Honduras, and Santo Domingo, Dominican Republic in 2001 and 2002, respectively. We closed the Mexico City, Mexico
plant in October 2002. With the closure of the Mexico City, Mexico plant, and prior to the acquisition discussed below, the Guatemala City, Guatemala plant is our only remaining zinc carbon
manufacturing plant. The consolidation of our zinc carbon capacity within Latin America is consistent with the global market trend away from zinc carbon toward alkaline batteries.

In
October 2002, we announced the closure of operations at our Madison, Wisconsin packaging center and Middleton, Wisconsin distribution center and combination of the two
operations into a new leased complex being built in Dixon, Illinois. Transition to the new facililty is expected by June 2003.

Meeting Consumer Needs through Technology and Development

We continue to focus our efforts on meeting consumer needs for portable power and lighting products through new product development and technology innovations. We
have announced improvements and new developments in our rechargeable, alkaline, hearing aid, and lighting products product lines.

During
2001, we introduced a one-hour charger for nickel metal hydride (NiMH) batteries, and began selling higher performing NiMH batteries. In 2002, we announced the
development of a revolutionary rechargeable NiMH battery system capable of recharging batteries in as little as 15 minutes and which we anticipate will be available in the retail market during
2003. These technological advancements are expected to provide consumers with portable, rechargeable power as the use of digital cameras and other high drain devices continues to grow.

In
2002, we launched our new, more powerful Maximum Plus alkaline batteries, with bold new graphics. Also during 2001 and 2002, we increased the performance of our hearing
aid batteries, and launched innovative packaging allowing consumers to more easily dispense the hearing aid batteries. Finally, we rejuvenated our lighting products product line through a series of
new product launches designed to reach unique markets within the mass and retail channels.

We
believe that our products are well poised to meet the portable power and lighting needs for consumers. We will continue to focus on identifying new technologies necessary to meet
consumer and retailer needs within the marketplace.

Competitive Landscape

The alkaline battery business is highly competitive on a global scale. Within North America, there are three primary branded providers of alkaline batteries. The
alkaline marketplace has seen changes in recent years related to product line segmentation, with attempts to segment the category into high-performance, regular and value positions,
combined with the introduction of private label batteries at certain retailers. In addition, market participants continue to engage in high levels of promotional activities to gain market share.

Within
Latin America, poor economic conditions have dramatically impacted battery sales especially within the heavy duty product line. Heavy duty batteries continue to be the largest
share of

14

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the battery market in Latin America. In North America the majority of consumers purchase alkaline batteries.

The
rechargeable business has experienced dramatic changes over the past three years. Primary rechargeable alkaline sales have declined over this period with a shift towards rechargeable
batteries, such as NiMH, which are higher performing in high drain devices. Our development of a one-hour charger and an innovative 15-minute rechargeable battery technology
help us maintain the number one market position within the rechargeable category in the United States with approximately 60% market share, as estimated by management.

Within
the hearing aid battery category, we continue to hold the number one global market position based on management estimates. We believe that our close relationship with hearing aid
manufacturers and other customers, as well as our product performance improvements and packaging innovations position us for continued success in this category.

Recent Developments

On October 1, 2002, we acquired the consumer battery business of VARTA AG (VARTA). The combination of the Rayovac and VARTA brands makes us a much
stronger global competitor selling in more than 100 countries worldwide. We believe that the combination of these two businesses provides us with a strong platform for market growth, improved
customer service, and technology advancements for consumers. We are now one of the largest consumer battery companies in the world with the number one market position in Germany, the largest European
battery market, number two overall market position in Europe, a stronger number one position in Latin America, excluding Brazil, as well as the leading value brand in North America (all market shares
based on management estimates on a unit basis).

On
October 10, 2002, we announced a series of initiatives to position the combined company for future growth opportunities and to optimize the global resources of the combined
VARTA and Rayovac organizations. These initiatives include the elimination of duplicate costs in the VARTA and Rayovac organizations and are expected to provide significant benefit to the combined
organization. We expect that all geographies will benefit from these initiatives.

Seasonal Product Sales

Rayovac's quarterly results are impacted by our seasonal sales. Sales during the first and fourth fiscal quarters of the year are generally higher than other
quarters due to the impact of the December holiday season. The seasonality of our sales during the last three fiscal years is as follows:

Percent of Annual SalesFiscal Quarter Ended2000

2001

2002December

30
%
27
%
28
%March

20

22

21June

22

24

24September

28

27

27


Fiscal Year Ended September 30, 2002 Compared to Fiscal Year Ended September 30, 2001

Highlights of consolidated operating results

Net Sales.Our net sales decreased $43.5 million, or 7.1%, to $572.7 million in fiscal 2002 from
$616.2 million the previous year. Increases in hearing aid battery and lighting product sales were unable to offset declines in heavy duty and alkaline sales.

Net Income.Our net income for fiscal 2002 increased $17.7 million, or 153.9%, to $29.2 million from
$11.5 million the previous year. The increase reflects a reduction in interest expense attributable

15

---

to the retirement of $65.0 million in Senior Subordinated Notes following the June 2001 stock offering, plus a $56.1 million reduction in debt during fiscal 2002 due to strong
cash flow from operations. In addition, fiscal 2001 results reflect a $22.3 million pretax restructuring charge, and a $5.4 million extraordinary loss, net of tax. These improvements
were partially offset by a bad debt reserve of $7.5 million, net of tax, recognized in fiscal 2002 related to the bankruptcy filing of a key customer.

Segment Results.We evaluate segment profitability based on income from operations before special charges and corporate
expenses, which includes corporate purchasing expense, general and administrative expense and research and development expense. All depreciation and amortization included in income from operations is
related to a segment. Total segment assets are set forth in Note 12 of Notes to Consolidated Financial Statements filed herewith.

North America

2001

2002Revenue from external customers

$
448.8

$
435.6Segment profit


80.8


85.5Segment profit as a % of net sales


18.0
%

19.6
%


Our
revenue from external customers decreased $13.2 million, or 2.9%, to $435.6 million in fiscal 2002 from $448.8 million the previous year. Heavy duty sales
decreases of $12.3 million, or 33.8%, reflect the trend in the industry toward alkaline and the discontinuation of certain products at selected stores of a major retailer. Alkaline sales
decreases of $4.8 million, or 1.8% were attributable to the decline in sales to a key customer in bankruptcy, a cautious retail inventory environment and continued promotional activity, and our
inability to anniversary sales to an OEM customer in the previous year. Increases in lighting products of $4.3 million, or 7.6%, resulted from new product launches and distribution gains.

Our
profitability increased $4.7 million, or 5.8%, to $85.5 million in fiscal 2002 from $80.8 million the previous year. This increase was primarily attributable to
cost containment programs that lowered operating expenses, and improved gross profit margins reflecting the benefits of the 2001 plant closures and other cost improvement initiatives. This was
partially offset by a $12.0 million bad debt reserve, net of recoveries, resulting from the bankruptcy filing of a key customer.

Latin America

2001

2002Revenue from external customers

$
118.7

$
84.7Segment profit


16.9


5.3Segment profit as a % of net sales


14.2
%

6.3
%


Our
revenue from external customers decreased $34.0 million, or 28.6%, to $84.7 million in fiscal 2002 from $118.7 million the previous year due primarily to
decreased sales of zinc carbon batteries. Net sales were impacted by unfavorable economic conditions, curtailment of shipments to certain distributors and wholesalers who were delinquent on payments,
political uncertainties in Argentina and Venezuela, and the unfavorable impacts of currency devaluation which contributed approximately $9.3 million of the sales decline versus fiscal 2001.

In
spite of the sales decline, the segment remained profitable, with profit of $5.3 million in fiscal 2002. However, this was a decrease of $11.6 million, or 68.6%, from
the previous year. This decrease was primarily attributable to the impact of the sales decline, partially offset by lower advertising expenses and a reduction in other operating expenses in the
region. As of October 1, 2001, the Company adopted Financial Accounting Standards Board Statement No. 142 which resulted in a reduction of amortization expense of $3.0 million for
the year. Segment profit margins decreased

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primarily due to an unfavorable customer mix compounded by relatively fixed operating expenses spread over lower sales.

Europe/ROW

2001

2002Revenue from external customers

$
48.7

$
52.5Segment profit


4.1


5.1Segment profit as a % of net sales


8.4
%

9.7
%


Our
revenue from external customers increased $3.8 million, or 7.8%, to $52.5 million in fiscal 2002 from $48.7 million the previous year, primarily reflecting
increased sales of alkaline and hearing aid batteries, and favorable impacts of foreign currency movements.

Our
profitability increased $1.0 million, or 24.4%, due primarily to sales gains and a reduction in operating expenses due to cost containment programs and the adoption of
Statement No. 142, which resulted in lower amortization expense.

Corporate Expenses.Our corporate expenses increased $6.6 million, or 26.3%, to $31.7 million in fiscal 2002
from $25.1 million the previous year. The increase was primarily due to higher legal expenses, technology spending, and management incentives.

Special Charges.In 2002, we recorded net special charges of $1.2 million related to: (i) the closure of our
manufacturing facility in Santo Domingo, Dominican Republic, (ii) certain rationalization efforts in our Mexico City, Mexico manufacturing facility, and (iii) the reversal of
$1.3 million of expenses related to the December 2000 restructuring announcement which were not realized. Special charges of $22.3 million were recorded in 2001.

Income from Operations.Our income from operations increased $8.6 million, or 15.8%, to $63.0 million in fiscal
2002 from $54.4 million the previous year. This increase was primarily due to reduction in special charges of $21.1 million offset by a $12.0 million bad debt reserve, net of
recoveries, resulting from the bankruptcy filing of a key customer.

Interest Expense.Interest expense decreased $11.2 million, or 41.2%, to $16.0 million in fiscal 2002 from
$27.2 million in the previous year primarily due to the retirement of $65.0 million in Senior Subordinated
Notes in June 2001 using proceeds from our primary offering and the repayment of $56.1 million in debt from our strong cash flow from operations.

Income Tax Expense.Our effective tax rate for fiscal 2002 was 36.0% compared to 35.4% for fiscal 2001. The higher rate for
fiscal 2002 primarily reflects a change in geographic profitability away from lower tax jurisdictions, primarily within Latin America, and proportionately higher income in the United States.

Extraordinary Item.In fiscal 2001, we recorded extraordinary expense of $5.4 million, net of tax, resulting from the
premium on the repurchase of $65.0 million of Senior Subordinated Notes and the related write-off of unamortized debt issuance costs.

Fiscal Year Ended September 30, 2001 Compared to Fiscal Year Ended September 30, 2000

Highlights of consolidated operating results

Net Sales.Our net sales decreased $14.7 million, or 2.3%, to $616.2 million in fiscal 2001 from
$630.9 million the previous year. Increases in alkaline and hearing aid battery sales were offset by decreased specialty battery sales and lighting products sales.

Net Income.Our net income for fiscal 2001 decreased $26.9 million, or 70.0%, to $11.5 million from
$38.4 million the previous year. The decrease reflects the impact of a $22.3 million pretax

17

---

restructuring charge, a $5.4 million extraordinary loss, net of tax, and sales softness in North America and Europe/ROW.

North America

2000

2001Revenue from external customers

$
468.2

$
448.8Segment profit


95.3


80.8Segment profit as a % of net sales


20.4
%

18.0
%


Our
revenue from external customers decreased $19.4 million, or 4.1%, to $448.8 million in fiscal 2001 from $468.2 million the previous year due primarily to
increased sales of alkaline batteries and hearing aid batteries offset by decreased sales of lighting products and specialty batteries.

Alkaline
sales increases of $15.1 million, or 5.9%, were driven by distribution gains, product line expansion, and strong sales in the mass merchandiser and OEM trade channels
partially offset by the impacts of Y2K on sales volumes and lower promotional activity at certain food retailers this year. Hearing aid battery sales increases of $4.7 million, or 13.0%, were
driven by strength in the professional channel and expanded retail distribution in fiscal 2001. Lighting product sales decreases of $14.9 million, or 20.9%, were driven by weakness in the
lights and lantern battery category reflecting the lingering impact of the Y2K phenomenon and our inability to anniversary a strong hurricane season in the previous year. Specialty battery sales
decreases versus last year primarily reflect softness in camcorder and lithium battery sales reflecting general softness in lithium battery demand from OEM customers in the PC, telecommunications, and
electronics industries and the transition to a camcorder battery licensing agreement.

Our
profitability decreased $14.5 million, or 15.2%, to $80.8 million in fiscal 2001 from $95.3 million the previous year. This decrease was primarily attributable
to sales volume decreases and operating expense increases partially offset by improved gross profit margins. The operating expense increases were primarily driven by increased distribution costs
reflecting fuel surcharges, higher shipping and handling costs and bad debt write-offs due to customer bankruptcies. The improvement in gross profit margins was primarily the result of
previously announced cost rationalization initiatives and a favorable shift in product mix away from lower margin lithium, camcorder, and lighting products to more profitable alkaline and hearing aid
batteries.

Latin America

2000

2001Revenue from external customers

$
112.2

$
118.7Segment profit


20.3


16.9Segment profit as a % of net sales


18.1
%

14.2
%


Our
revenue from external customers increased $6.5 million, or 5.8%, to $118.7 million in fiscal 2001 from $112.2 million the previous year due primarily to
increased sales of alkaline batteries partially offset by lower sales of zinc carbon batteries and unfavorable impacts of currency devaluation of $1.7 million.

18

---



The alkaline sales growth in Latin America primarily reflects new distribution in mass merchandiser chains compounded by the expansion into the Southern region of South America. Heavy
duty sales were affected by a slowing economic environment and the impact of currency devaluation.

Our
profitability decreased $3.4 million, or 16.8%, to $16.9 million in fiscal 2001 from $20.3 million the previous year. This decrease was primarily attributable to
operating expense increases partially offset by improved gross profit margins. The operating expense increases were primarily driven by increased promotional and marketing support associated with new
distribution initiatives in the Southern region and higher operating expenses associated with our expansion at larger mass merchandiser chains in Mexico.

Europe/ROW

2000

2001Revenue from external customers

$
50.6

$
48.7Segment profit


6.1


4.1Segment profit as a % of net sales


12.1
%

8.4
%


Our
revenue from external customers decreased $1.9 million, or 3.8%, to $48.7 million in fiscal 2001 from $50.6 million the previous year, due primarily to the
unfavorable impacts of currency devaluation of $3.4 million. Excluding the negative impact of currency devaluation net sales increased 3.0% reflecting sales increases in hearing aid and
alkaline batteries. Alkaline battery sales increases were driven primarily by new distribution.

Our
profitability decreased $2.0 million, or 32.8%, due primarily to lower gross profit margins attributable to an unfavorable product mix and increased operating expenses
attributable to our new distribution.

Corporate Expenses.Our corporate expenses decreased $7.3 million, or 22.5%, to $25.1 million in fiscal 2001
from $32.4 million the previous year. As a percentage of total sales, our corporate expense was 4.1% compared to 5.1% in the previous year. These decreases were primarily due to lower
management incentives and legal expenses partially offset by higher research and development expenses reflecting an increase in technology spending.

Special Charges.We recorded special charges of $22.3 million related to: (i) an organizational restructuring
in the U.S., (ii) manufacturing and distribution cost rationalization initiatives in the Company's Tegucigalpa, Honduras and Mexico City, Mexico manufacturing facilities and in our European
operations, (iii) the closure of the Company's Wonewoc, Wisconsin, manufacturing facility, (iv) the rationalization of uneconomic manufacturing processes at the Company's Fennimore,
Wisconsin, manufacturing facility, and rationalization of packaging operations and product lines, and (v) costs associated with our secondary offering in June 2001. The amount recorded
includes $10.1 million of employee termination benefits for approximately 570 employees, $10.2 million of equipment, inventory, and other asset write-offs, and
$2.0 million of other expenses.

Income from Operations.Our income from operations decreased $34.9 million, or 39.1%, to $54.4 million in
fiscal 2001 from $89.3 million the previous year. This decrease was primarily due to special charges of $22.3 million and decreased profitability attributable to sales volume decreases.

Interest Expense.Interest expense decreased $3.4 million, or 11.1%, to $27.2 million in fiscal 2001 from
$30.6 million in the previous year primarily due to lower effective interest rates and the redemption of the majority of our subordinated debt in June 2001.

19

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Income Tax Expense.Our effective tax rate for fiscal 2001 was 35.4% compared to 33.8% for fiscal 2000. The higher rate for
fiscal 2001 primarily reflects a higher foreign tax rate attributable to increased tax rates in certain Latin America countries and startup losses in the Southern region of South America not fully
benefited.

Extraordinary Item.We recorded extraordinary expense of $5.4 million, net of tax, resulting from the premium on the
repurchase of $65.0 million of Senior Subordinated Notes and the related write-off of unamortized debt issuance costs.

Liquidity and Capital Resources

During fiscal 2002, our operating activities generated $66.8 million of cash, compared to $18.0 million in fiscal 2001, an increase of
$48.8 million. Operating cash flows from changes in working capital accounted for $48.1 million of the increase which were primarily driven by lower investments in receivables and
inventory, slightly offset by higher prepaid and other assets and lower accrued special charges reflecting the completion of the December 2000 restructuring initiatives.

Capital
expenditures for fiscal 2002 were $15.6 million, a decrease of $4.1 million from fiscal 2001. Capital expenditures in 2002 were funded by cash flow from operations.
Capital expenditures for fiscal 2003 are expected to be approximately $28.0 million which will include spending for leasehold improvements on our new North American packaging and distribution
center, spending required by newly acquired VARTA entities, and continued technology investments as well as continued investment in our manufacturing operations.

As
of September 30, 2002, our current credit facilities include a revolving credit facility of $250.0 million and a $75.0 million five-year amortizing
term loan. As of September 30, 2002, $174.5 million and $23.1 million, respectively, of the revolver and the term loan were outstanding. In addition, approximately
$5.8 million of the remaining availability under the revolver was utilized for outstanding letters of credit. The term facility also provides for annual prepayments, over and above the normal
amortization. Such payments would be a portion of "Excess Cash Flow" (EBITDA, as defined, less certain operating expenditures including scheduled principal payments of long-term debt). The
quarterly amortization is reduced prorata for the effect of prepayments made as a result of Excess Cash Flow. The fees associated with these facilities have been capitalized and are being amortized
over the term of the facilities. Indebtedness under these amended facilities is secured and is guaranteed by certain of our subsidiaries.

During
fiscal 2002, our board of directors granted 1,057,190 options to purchase shares of our Common stock to various employees of the Company under the 1997 Rayovac Incentive Plan. All
grants were at an exercise price equal to the market price of our Common stock on the date of grant with prices ranging from $13.00 to $16.00 per share. We also granted approximately 24,000 shares of
restricted stock on August 16, 2002, from the 1997 Rayovac Incentive Plan to a member of management; the restrictions on these shares will lapse on September 30, 2003. The total market
value of the restricted shares on the date of grant totaled approximately $0.3 million and has been recorded as unearned compensation as a separate component of shareholders' equity. Unearned
compensation is being amortized to expense over the vesting period.

We
believe our cash flow from operating activities and periodic borrowings under our credit facilities will be adequate to meet the short-term and long-term
liquidity requirements of our existing business previous to the expiration of those credit facilities, although no assurance can be given in this regard.

We
engage in hedging transactions in the ordinary course of our business. See Note 2(r) to the Consolidated Financial Statements.

20

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On
October 1, 2002, the Company entered into an Amended and Restated Agreement ("Third Restated Agreement") to finance the acquisition of the consumer battery business of VARTA
AG. The Third Restated Agreement includes a $100 million seven-year revolving credit facility, a EUR 50 million seven-year revolving credit facility, a $300 million seven-year
amortizing term loan, a EUR 125 million seven-year amortizing term loan and a EUR 50 million six-year amortizing term loan. The term facilities provide for quarterly amortization
totaling (assuming an exchange rate of the Euro to the Dollar of 1 to 1) of approximately $9.3 million in 2003 and 2004, $14.3 million in 2005, 2006, and 2007,
$61.3 million in 2008 and $352.5 million in 2009. The term facility also provides for annual prepayments, over and above the normal amortization. Such payments would be a portion of
"Excess Cash Flow" (EBITDA, as defined, less certain operating expenditures including scheduled principal payments of long-term debt). The quarterly amortization is reduced prorata for the
effect of prepayments made as a result of Excess Cash Flow. The fees associated with these facilities will be capitalized and amortized over the term of the facilities. Unamortized fees associated
with the replaced facilities will be written off as a charge to earnings in the quarter ended December 29, 2002. Indebtedness under these amended facilities is secured, is guaranteed by certain
of our subsidiaries and the Euro-denominated revolving facility is subject to a borrowing base ("Borrowing Base") of certain European assets.

Impact of Recently Issued Accounting Standards

See discussion in Note 2(w) to the Consolidated Financial Statements.

Critical Accounting Policies

Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and fairly present the
financial position and results of operations of the Company. We believe the following accounting policies are critical to an understanding of our financial statements. The application of these
policies requires management judgment and estimates in areas that are inherently uncertain.

Valuation of Assets and Asset Impairment

We evaluate certain long-lived assets, such as property, plant and equipment, and certain intangibles for impairment based on the expected future cash flows or
earnings projections. An asset's value is deemed impaired if the discounted cash flows or earnings projections generated do not substantiate the carrying value of the asset. The estimation of such
amounts requires significant management judgment with respect to revenue and expense growth rates, changes in working capital, and selection of an appropriate discount rate, as applicable. The use of
different assumptions would increase or decrease discounted future operating cash flows or earnings projections and could, therefore, change impairment determination.

We
adopted Financial Accounting Standards Statement No. 142,Goodwill and Other Intangible Assets, effective October 1,
2001. Statement No. 142 requires goodwill and other intangible assets with indefinite useful lives not be amortized, and that impairment of such assets be evaluated as discussed above at least
annually.

We
evaluate deferred tax assets based on future earnings projections. An asset's value is deemed impaired if the earnings projections do not substantiate the carrying value of the asset.
The estimation of such amounts requires significant management judgment with respect to revenue and expense growth rates, changes in working capital, and other assumptions, as applicable. The use of
different assumptions would increase or decrease future earnings projections and could, therefore, change the determination of whether the asset is realizable.

21

---

See
Notes 2(c), 2(h), 2(i), 2(v), 4, 5, and 9 to the Consolidated Financial Statements for more information about these assets.

Revenue Recognition and Concentration of Credit Risk

We recognize revenue from product sales at the point at which all risks and rewards of ownership have passed to the customer. The Company is not obligated to
allow for product returns.

The
Company enters into various promotional arrangements, primarily with retail customers, which require the Company to estimate total purchases from the Company. In addition, the
Company enters into promotional programs, primarily with retail customers, which require the Company to estimate and accrue the estimated costs of the promotional program. The Company monitors its
commitments for
promotional arrangements and programs, and uses statistical measures and past experience to record a liability for the estimate of the earned, but unpaid, promotional costs. The use of different
assumptions would increase or decrease the estimate of the earned, but unpaid, promotional costs and could, therefore, change the liability recorded.

The
Company's trade receivables subject the Company to credit risk which is evaluated based on changing economic, political, and specific customer conditions. The Company assesses these
risks and makes provisions for collectibility based on our best estimate of the risks present and information available at the date of the financial statements. The use of different assumptions may
change the estimate of collectibility.

See
Notes (2b), (2c), and (2e) to the Consolidated Financial Statements for more information about our Revenue Recognition and Credit policies.

Pensions

Our accounting for pension benefits is primarily based on discount rate, expected and actual return on plan assets, and other assumptions made by management, and
is impacted by outside factors such as equity and fixed income market performance. Pension liability is principally the estimated present value of future benefits, net of plan assets. Pension expense
is principally the sum of interest and service cost of the plan, less the expected return on plan assets and the amortization of the difference between our assumptions and actual experience. The
expected return on plan assets is calculated by applying an assumed rate of return to the fair value of plan assets. If plan assets decline due to poor performance by the markets and/or interest rate
declines, as was experienced in fiscal 2002, our pension liability increases, ultimately increasing future pension expense. See Notes 2(c) and 11 to the Consolidated Financial Statements for a more
complete discussion of our employee benefit plans.

Restructuring

Restructuring liabilities are recorded for estimated cost of facility closures, significant organizational adjustments, and measures undertaken by management to
exit certain activities. Costs for such activities are estimated by management after evaluating detailed analyses of the costs incurred. Such liabilities could include amounts for items such as
severance costs and related benefits (including settlements of pension plans), impairment of property and equipment and other current or long term assets, lease termination payments, plus any other
items directly related to the exit costs. While the actions are carried out as expeditiously as possible, changes in estimates, resulting in an increase to or a reversal of a previously recorded
liability, may be required as management executes the restructuring plan. See Notes 15 and 18 to the Consolidated Financial Statements for discussion of recent restructuring initiatives and related
costs.

22

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Loss Contingencies

Loss contingencies are recorded as liabilities when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The
outcome of existing litigation and the impact of environmental matters are examples of situations evaluated as loss contingencies. Estimating the probability and magnitude of losses is often dependent
upon management judgments of potential actions by third parties and regulators. It is possible that changes in estimates or an increased probability of an unfavorable outcome could materially affect
future results of operations. See further discussion in Item 3 ("Legal Proceedings"), and Notes 2(c), 2(t), and 13 to the Consolidated Financial Statements.

Other Significant Accounting Policies

Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed above, are also critical to understanding the
Consolidated Financial Statements. Our notes to the Consolidated Financial Statements contain additional information related to our accounting policies and should be read in conjunction with this
discussion.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Factors

We have market risk exposure from changes in interest rates, foreign currency exchange rates and commodity prices. We use derivative financial instruments for
purposes other than trading to mitigate the risk from such exposures.

A
discussion of our accounting policies for derivative financial instruments is included in Note 2 in the Consolidated Financial Statements.

Interest Rate Risk

We have bank lines of credit at variable interest rates. The general level of U.S. interest rates, LIBOR, IBOR, and to a lesser extent European Base rates,
primarily affects interest expense. We use interest rate swaps to manage such risk. The net amounts to be paid or received under interest rate swap agreements are accrued as interest rates change, and
are recognized over the life of the swap agreements, as an adjustment to interest expense from the underlying debt to which the swap is designated. The related amounts payable to, or receivable from,
the contract counter-parties are included in accrued liabilities or accounts receivable.

Foreign Exchange Risk

We are subject to risk from sales and loans to our subsidiaries as well as sales to, purchases from and bank lines of credit with, third-party customers,
suppliers and creditors, respectively, denominated in foreign currencies. Foreign currency sales are made primarily in Pounds Sterling, Canadian Dollars, Euros, Mexican Pesos, Dominican Pesos,
Guatemalan Quetzals, Venezuelan Bolivars, Argentine Pesos, Chilean Pesos and Honduran Lempira. Foreign currency purchases are made primarily in Pounds Sterling, Euros, Mexican Pesos and Guatemalan
Quetzals. We manage our foreign exchange exposure from anticipated sales, accounts receivable, intercompany loans, firm purchase commitments and credit obligations through the use of naturally
occurring offsetting positions (borrowing in local currency), forward foreign exchange contracts, foreign exchange rate swaps and foreign exchange options. The related amounts payable to, or
receivable from, the contract counter parties are included in accounts payable or accounts receivable.

23

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Commodity Price Risk

We are exposed to fluctuation in market prices for purchases of zinc used in the manufacturing process. We use commodity swaps, calls and puts to manage such
risk. The maturity of, and the quantities covered by, the contracts are closely correlated to our anticipated purchases of the commodities. The cost of calls, and the premiums received from the puts,
are amortized over the life of the contracts and are recorded in cost of goods sold, along with the effects of the swap, put and call contracts. The related amounts payable to, or receivable from, the
counterparties are included in accounts payable or accounts receivable.

Sensitivity Analysis

The analysis below is hypothetical and should not be considered a projection of future risks. Earnings projections are before tax.

As
of September 30, 2002, the potential change in fair value of outstanding interest rate derivative instruments, assuming a 1% unfavorable shift in the underlying interest rates
would be a loss of $3.5 million. The net impact on reported earnings, after also including the reduction in one year's interest expense on the related debt due to the same shift in interest
rates, would be a net loss of $1.5 million.

As
of September 30, 2002, the potential change in fair value of outstanding foreign exchange rate derivative instruments, assuming a 10% unfavorable change in the underlying
foreign exchange rates would be immaterial. The net impact on future cash flows, after also including the gain in value on the related accounts receivable and contractual payment obligations
outstanding at September 30, 2002 due to the same change in exchange rates, would be a net gain of $0.8 million.

As
of September 30, 2002, the potential change in fair value of outstanding commodity price derivative instruments, assuming a 10% unfavorable change in the underlying commodity
prices would be a loss of $0.6 million. The net impact on reported earnings, after also including the reduction in cost of one year's purchases of the related commodities due to the same change
in commodity prices, would be a net gain of $0.2 million.

Forward Looking Statements

Certain of the information contained in this Annual Report on Form 10-K is not historical and may include "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking language as "expects," "anticipates," "intends," "believes," "will,"
"estimate," "should," "may" or other similar terms. In reviewing such information, you should note that such statements are based upon current expectations of future events and projections; our actual
results may differ materially from those set forth in such forward-looking statements.

Important
factors that could cause our actual results to differ materially from those contained in this Annual Report on Form 10-K include, without limitation,
(1) competitive promotional activity or spending by competitors or price reductions by competitors, (2) the introduction of new product features or technological developments by
competitors and/or the development of new competitors or competitive brands, (3) the loss of, or a significant reduction in, sales to a significant retail customer, (4) difficulties or
delays in the integration of VARTA's operations, (5) our ability to develop and successfully introduce new products and protect our intellectual property, (6) our ability to successfully
implement, achieve and
sustain manufacturing and distribution cost efficiencies and improvements, and fully realize anticipated cost savings, (7) the impact of unusual items resulting from the implementation of new
business strategies, acquisitions and divestitures or current and proposed restructuring activities, (8) the cost and effect of unanticipated legal, tax or regulatory proceedings or new laws or
regulations

24

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(including environmental regulations), (9) changes in accounting policies applicable to our business, (10) interest rate, exchange rate and raw material price fluctuations,
(11) the effects of general economic conditions, including inflation, labor costs and stock market volatility, or changes in trade, monetary or fiscal policies in the countries where we do
business, and (12) the effects of political or economic conditions or unrest in Latin America and other international markets.

Some
of the above-mentioned factors are described in further detail in the section entitled "Risk Factors" beginning on page S-10 of our Prospectus Supplement (to Prospectus
dated June 20, 2001) filed pursuant to Rule 424(b)(5) with the Securities and Exchange Commission on June 21, 2001. Other factors and assumptions not identified above were also
involved in the derivation of the forward-looking statements contained in this Annual Report on Form 10-K. If such other factors impact our results or if such assumptions are not
correct or do not come to fruition, our actual results may differ materially from those projected. We assume no obligation to update these forward-looking statements to reflect actual results or
changes in factors or assumptions affecting such forward-looking statements.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required for this Item is included in this Annual Report on Form 10-K on pages F-1 through F-43,
inclusive and is incorporated herein by reference.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is certain information, as of December 1, 2002, regarding each of our directors and executive officers.

|Name                  |  | Age |  | Position and Office(s)                              
|--------------------- |  | --- |  | ----------------------------------------------------
|David A. Jones        |  | 53  |  | Chairman of the Board and Chief Executive Officer   
|Kent J. Hussey        |  | 56  |  | President and Chief Operating Officer and Director  
|Kenneth V. Biller     |  | 54  |  | Executive Vice President of Operations              
|Remy E. Burel         |  | 51  |  | Executive Vice President-Europe                     
|Luis A. Cancio        |  | 62  |  | Executive Vice President-Latin America              
|Stephen P. Shanesy    |  | 46  |  | Executive Vice President-North America              
|Randall J. Steward    |  | 48  |  | Executive Vice President and Chief Financial Officer
|Merrell M. Tomlin     |  | 50  |  | Executive Vice President of Global Sales            
|Paul G. Cheeseman     |  | 44  |  | Senior Vice President-Technology                    
|William P. Carmichael |  | 59  |  | Director                                            
|John S. Lupo          |  | 56  |  | Director                                            
|Philip F. Pellegrino  |  | 62  |  | Director                                            
|Thomas R. Shepherd    |  | 72  |  | Director                                            
|Barbara S. Thomas     |  | 53  |  | Director                                            

Mr. Jones
has served as Chairman of our Board of Directors and our Chief Executive Officer since September 12, 1996. From September 1996 to April 1998,
Mr. Jones also served as our President. Between February 1995 and March 1996, Mr. Jones was Chief Operating Officer, Chief Executive Officer and Chairman of the Board of
Directors of Thermoscan, Inc., a manufacturer and marketer of infrared ear thermometers for consumer and professional use. From 1989 to September 1994, he served as President and Chief
Executive Officer of The Regina Company, a manufacturer of vacuum cleaners

25

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and other floor care equipment. In addition, Mr. Jones serves as a director of United Industries Corp. and Tyson Foods, Inc. Mr. Jones has over 30 years of experience
working in the consumer products industry.

Mr. Hussey
is a director of Rayovac and has served as our President and Chief Operating Officer since August 2002 and from April 1998 until November 30, 2001.
From December 1, 2001 through July 2002, Mr. Hussey served as President and Chief Financial Officer. Prior to April 1998 and since joining us in October 1996,
Mr. Hussey was our Executive Vice President of Finance and Administration, our Chief Financial Officer and a director. From 1994 to 1996, Mr. Hussey was Vice President and Chief
Financial Officer of ECC International, a producer of industrial minerals and specialty chemicals and from 1991 to July 1994 he served as Vice President and Chief Financial Officer of The
Regina Company. Mr. Hussey also serves as a director of American Woodmark Corporation.

Mr. Biller
was named our Executive Vice President of Operations in October 1999. From August 1998 to October 1999, he was our Senior Vice President of
Operations and from January to August 1998, he was our Senior Vice President of Manufacturing/Supply Chain. Prior to that time and since 1996, Mr. Biller was our Senior Vice President
and General Manager of Lighting Products & Industrial and, since 1995, was our Vice President and General Manager of Lighting Products & Industrial. Mr. Biller joined us in 1972
and has held numerous positions with us, including Director of Technology/Battery Products and Vice President of Manufacturing.

Mr. Burel
joined us and was named our Executive Vice President-Europe in October 2002, upon acquisition of the consumer battery division of VARTA AG. Before the
acquisition, Mr. Burel had been Chief Executive Officer of VARTA Geratebatterie GmbH since January 1, 2000. From May 1990 to December 1999, Mr. Burel held positions
of increasing responsibility at VARTA as International Marketing Manager, Geographical Area Manager (France, Spain and Portugal), Profit Center Manager (general purpose batteries) and Divisional Board
Member. Mr. Burel started his career at Gillette/Braun
and over the course of 13 years held six different positions in controlling and marketing in the United States, France and Germany from 1975 to 1988.

Mr. Cancio
was named our Executive Vice President-Latin America in October 2000. He joined Rayovac in August 1999 as our Senior Vice President and General Manager of
Latin America and served in that position until October 2000. In April 1997, Mr. Cancio became a founding principal of XCELL Group LLC, a private investment firm, and remains a
director of that firm. From 1980 to 1996, he held positions of increasing responsibility at Duracell International Inc., beginning as Vice President in Latin America and ending his tenure as
Senior Vice President in other international markets.

Mr. Shanesy
has been our Executive Vice President-North America since October 2002 and previously served as Executive Vice President of Global Brand Management since
April 1998. Prior to that time and from December 1997, Mr. Shanesy served as our Senior Vice President of Marketing and the General Manager of General Batteries and Lights. From
December 1996 to December 1997, Mr. Shanesy was our Senior Vice President of Marketing and General Manager of General Batteries. Prior to joining us, from 1993 to 1996,
Mr. Shanesy was Vice President of Marketing of Oscar Mayer.

Mr. Steward
rejoined us as our Executive Vice President and Chief Financial Officer in August 2002, after leaving for personal family reasons in December 2001. He
served as our Executive Vice President of Administration and Chief Financial Officer from October 1999 to December 2001. Mr. Steward initially joined us in March of 1998 as our
Senior Vice President of Corporate Development and was named Senior Vice President of Finance and Chief Financial Officer in April 1998, a position he held until October 1999. From
October 1997 to March 1998, Mr. Steward worked as an independent consultant, primarily with Thermoscan, Inc. and Braun AG, assisting with financial and operational issues.
From March 1996 to September 1997, Mr. Steward served as President

26

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and General Manager of Thermoscan, Inc. From January 1992 to March 1996, he served as Executive Vice President of Finance and Administration and Chief Financial Officer of
Thermoscan, Inc.

Mr. Tomlin
has been our Executive Vice President of Global Sales since October 2002 and previously served as Executive Vice President of Sales since October 1998.
Mr. Tomlin joined Rayovac in October 1996 as Senior Vice President of Sales. From March 1996 to September 1996, Mr. Tomlin served as Vice President of Sales of Braun
of North America/Thermoscan and from August 1995 to March 1996, he served as Vice President Sales of Thermoscan, Inc. Prior to that time, Mr. Tomlin was Vice President of
Sales of various divisions of Casio Electronics.

Dr. Cheeseman
was named our Senior Vice President-Technology on November 15, 2001. He joined Rayovac in June 1998 as our Vice President-Technology and has led all
major technology initiatives at Rayovac since that time. Dr. Cheeseman came to Rayovac from Duracell, Inc., a division of Gillette, where he held various positions of increasing
responsibility including Director of Operations from 1992 to 1995 and Director of Technology from 1995 to June 1998.

Mr. Carmichael
has served as a director of Rayovac since August 2002. He served as Senior Managing Director of the Succession Fund from 1998 to 2001 which provided
strategic financial and tax consulting to closely held private companies. Mr. Carmichael also served as Senior Vice President of Sara Lee Corporation from 1991 to 1993, Vice President and Chief
Financial Officer of Beatrice Foods Company from 1985 to 1990, Vice President of E-II Holdings from 1987 to 1988 and Vice President of Esmark, Inc. from 1976 to 1984. He is a
director of Cobra Electronics Corporation and Nations Funds. Mr. Carmichael is the chairperson of our Audit Committee.

Mr. Lupo
has been a director of Rayovac since July 1998 and is a principal in the consulting firm Renaissance Partners, LLC, which he joined in February 2000. From
October 1998 until November 1999, he served as Executive Vice President for Sales and Marketing for Bassett Furniture Industries, Inc. From April 1998 to
October 1998, Mr. Lupo served as a consultant in the consumer products industry. Prior to that time and since August 1996, Mr. Lupo served as Senior Vice President and
Chief Operating Officer for the international division of Wal-Mart Stores, Inc. From October 1990 to August 1996, Mr. Lupo served as Senior Vice
PresidentGeneral Merchandise Manager of Wal-Mart Stores, Inc. Mr. Lupo is a member of our Corporate Governance and Nominating Committee.

Mr. Pellegrino
has served as a director since November 2000. He currently serves as Senior Vice President and President of Sales for Kraft Foods Inc., and has held
that position since September 2000. From 1995 to September 2000, he served as Senior Vice President of Sales and Customer Service for Kraft Foods. He has been employed by Kraft Foods or
its subsidiary, Oscar Mayer, since 1964 in various management and executive positions. Mr. Pellegrino is a member of both our Audit Committee and our Compensation Committee.

Mr. Shepherd
has been a director of Rayovac since our September 1996 recapitalization. Mr. Shepherd is Chairman of TSG Equity Partners, LLC and is also a director of
The Vermont Teddy Bear Company Inc. and various private corporations. He currently serves as a Special Partner of Thomas H. Lee Partners, L.P. and has been engaged as a consultant to Thomas H.
Lee Co. since 1986. From 1986 through 1998, Mr. Shepherd served as a Managing Director of Thomas H. Lee Company. In addition, Mr. Shepherd is an officer of various other affiliates of
Thomas H. Lee Company. Mr. Shepherd is the chairperson of our Compensation Committee and a member of our Audit Committee.

Ms. Thomas
has served as a director of Rayovac since May 2002. She was most recently appointed interim Chief Executive Officer of The Ocean Spray Company in
November 2002. Ms. Thomas was President of Warner-Lambert Consumer Healthcare, the over-the-counter pharmaceuticals business of the Warner-Lambert Company, until
its purchase by Pfizer Inc. in July 2000. From 1993 to 1997,

27

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Ms. Thomas was employed by the Pillsbury Company, serving last as President of Pillsbury Canada Ltd. Prior to joining Pillsbury, Ms. Thomas served as Senior Vice President of
Marketing for Nabisco Brands, Inc. She also serves as a director of Dial Corporation and The Ocean Spray Company. Ms. Thomas is chairperson of our Corporate Governance and Nominating
Committee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's directors, officers and persons who own more than 10% of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely upon review of Forms 3, 4 and 5 (and amendments thereto) furnished to
us during or in respect of the fiscal year ended September 30, 2002, we are not aware of any director or executive officer who has not timely filed reports required by Section 16(a) of
the Exchange Act during or in respect of such fiscal year, except for the inadvertent late reporting by Thomas R. Shepherd of one sale of stock and the inadvertent late reporting by Randall J. Steward
of one grant of restricted stock and one grant of stock options.

28

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ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth compensation paid to our Chief Executive Officer and the other four most highly compensated executive officers during fiscal 2002,
fiscal 2001 and fiscal 2000 (the "Named Executive Officers") for services rendered in all capacities to us. Certain prior year amounts have been reclassified to conform with current year presentation.

|Name and Principal Position                                       |  | Fiscal
Year    |  | Salary ($) |                         | Bonus ($) |   | Other
Annual
Compensation ($) |  | Restricted
Stock
Awards ($) |                         | Securities
Underlying
Options (#) |   | All Other
Compensation ($) |    
|----------------------------------------------------------------- |  | -------------- |  | ---------- | ----------------------- | --------- | - | ----------------------------- |  | --------------------------- | ----------------------- | --------------------------------- | - | -------------------------- | ---
|David A. Jones,
Chairman of the Board and
Chief Executive Officer |  | 2002
2001
2000 |  | $          | 550,000
550,000
500,000 |           | $ | 400,000                       |  | $                           | 553,900
361,200
278,700 | (1)  (2)  (5)                     | $ | 1,180,000                  | (3)
|Kent J. Hussey,
President and Chief Operating
Officer             |  | 2002
2001
2000 |  |            | 385,000
385,000
350,000 |           |   |                               |  |                             | 196,000
125,200
56,500  | (6)  (7)  (8)                     |   | 826,000                    | (3)
|Luis A. Cancio,
Executive Vice President-Latin
America            |  | 2002
2001
2000 |  |            | 290,000
293,000
286,000 |           |   |                               |  |                             | 134,600
80,000
33,200   | (9)(10)(11)                       |   | 537,500                    | (3)
|Stephen P. Shanesy,
Executive Vice President-North
America        |  | 2002
2001
2000 |  |            | 290,000
290,000
265,000 |           |   |                               |  |                             | 136,800
84,700          | (12)(13)                          |   | 567,500                    | (3)
|Merrell M. Tomlin,
Executive Vice President of Global
Sales       |  | 2002
2001
2000 |  |            | 290,000
290,000
250,000 |           |   |                               |  |                             | 140,000
70,800
32,500   | (15)(13)(16)                      |   | 560,000                    | (3)

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Option Grants and Exercises

In connection with the 1996 recapitalization, the Board adopted the Rayovac Corporation 1996 Stock Option Plan (the "1996 Plan"). Pursuant to the 1996 Plan,
options may be granted with respect to an aggregate of 2,318,127 shares of Common Stock. At September 30, 2002 an aggregate of 1,237,367 options to purchase shares of Common Stock at a weighted
average exercise price of $7.06 per share, 508,181 of which relate to the 911,577 granted to David A. Jones in accordance with the terms of his employment agreement, were outstanding. See "Employment
Agreements". In September 1997, the Board adopted the 1997 Rayovac Incentive Plan ("Incentive Plan"). Pursuant to the Incentive Plan, stock-based awards may be granted, including options and
restricted stock, to purchase up to 5,000,000 shares of Common Stock. At September 30, 2002 an aggregate of 2,867,432 options at a weighted average exercise price of $17.01 were outstanding
under the Incentive Plan.

The
following table discloses the grants of stock options during fiscal 2002 to the Named Executive Officers.

Option Grants in Fiscal 2002

|                   |  | Individual Grants |  |      |  |  
|------------------ |  | ----------------- |  | ---- |  | -
|
|
|
|
|
|David A. Jones     |  | 175,000           |  | 16.6 |  | $
|Kent J. Hussey     |  | 75,000            |  | 7.1  |  | $
|Luis A. Cancio     |  | 50,000            |  | 4.7  |  | $
|Stephen P. Shanesy |  | 50,000            |  | 4.7  |  | $
|Merrell M. Tomlin  |  | 50,000            |  | 4.7  |  | $

The
following table sets forth information concerning options to purchase Common Stock held by the Named Executive Officers.

Aggregated Option Exercises In Fiscal 2002 And Fiscal Year-End Option Values

|Name               |  | Shares
Acquired
on Exercise |  | Value
Realized $ |  | Number of Securities
Underlying Unexercised
Options at
Fiscal Year End (#)
(Exercisable/Unexercisable) |  | Value of Unexercised
In-the-money
Options at
Fiscal Year End ($)(1)
(Exercisable/Unexercisable)
|------------------ |  | --------------------------- |  | ---------------- |  | ------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------
|David A. Jones     |  |                            |  |                 |  | 516,431/216,750                                                                                        |  | $                                                                                              
|Kent J. Hussey     |  |                            |  |                 |  | 174,089/156,770                                                                                        |  |                                                                                                
|Luis A. Cancio     |  |                            |  |                 |  | 83,250/166,750                                                                                         |  |                                                                                                
|Stephen P. Shanesy |  |                            |  |                 |  | 63,678/154,914                                                                                         |  |                                                                                                
|Merrell M. Tomlin  |  |                            |  |                 |  | 53,849/154,914                                                                                         |  |                                                                                                

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Pension Plan

In fiscal 1997 we contributed to a defined benefit pension plan covering all domestic non-union employees (the "Pension Plan"). On August 1,
1997 the Pension Plan accruals were frozen and the Pension Plan was officially terminated on October 1, 1997. We made no contributions to the Pension

30

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Plan during fiscal 2000, 2001 or 2002. Distribution of benefits due to participating employees under the Pension Plan was made during fiscal 1999. In fiscal 2000, 2001 and 2002 we contributed to a
defined contribution 401(k) plan covering domestic non-union employees (the "401(k) Plan"). We made contributions allocated on the basis of compensation and age as identified in the
summary compensation table.

Director Compensation

Directors who are employees of the Company receive no compensation for serving on the Board of Directors. Non-employee directors of the Company are
reimbursed for their out-of-pocket expenses in attending meetings of the Board of Directors. Messrs. Lupo, Pellegrino and Shepherd and Ms. Thomas received $6,250
per quarterly meeting in their capacities as directors for fiscal year 2002, plus $1,000 for each of the four Board of Director meetings they attended. In addition, each received $500 for each Board
Committee meeting they attended. Committee chairpersons each received an additional $500 for each Board Committee meeting they attended. Messrs. Lupo, Pellegrino, Shepherd and Carmichael and
Ms. Thomas have received and will continue to receive fully vested options to purchase 5,000 shares of Common Stock on each October 1st that they are serving on the Board
of Directors at an exercise price equal to the closing price of the Common Stock on the New York Stock Exchange on the trading day immediately preceding such grant.

Employment Agreements

We have an employment agreement with each of the Named Executive Officers. On October 1, 2002, we entered into amended and restated employment agreements
with David A. Jones (the "Jones Employment Agreement") and Kent J. Hussey (the "Hussey Employment Agreement"), as well as amended and restated employment agreements with each of Luis A. Cancio,
Stephen P. Shanesy and
Merrell M. Tomlin (together with the Jones Employment Agreement and the Hussey Employment Agreement, the "Executive Employment Agreements").

Each
of the Executive Employment Agreements:



31

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Under
their respective employment agreements, Mr. Jones is entitled to a base salary of $700,000 per annum, Mr. Hussey is entitled to a base salary of $435,000 per annum,
Mr. Shanesy, Mr. Tomlin and Mr. Cancio are each entitled to a base salary of $325,000 per annum (such base salaries may be increased from time to time at the discretion of the
Board of Directors) and each Named Executive Officer is entitled to an annual bonus based upon our achieving certain annual performance goals established by the Board of Directors.

In
addition, pursuant to the Jones Employment Agreement, Mr. Jones was paid a bonus of $400,000 in October 2000 as compensation for past services and will be paid an
additional bonus of $400,000 on September 30, 2003 and an additional bonus of $2,200,000 on October 1, 2005, should he remain with the Company as of such dates. In addition, the Jones
Employment Agreement provides that Mr. Jones will be granted the option to purchase his Rayovac-owned home for a nominal amount on April 30, 2003. In the event of a "sale" of Rayovac (as
defined in the Jones Employment Agreement), Mr. Jones' right to receive the September 30, 2003 bonus and his right to acquire his Rayovac-owned home shall accelerate to the date of the
"sale". Pursuant to the terms of a previous employment agreement, Mr. Jones purchased 227,895 shares of Common Stock at approximately $4.39 per share in connection with our 1996
recapitalization. One-half of the purchase price for those shares was paid in cash and one-half was paid with a promissory note from Mr. Jones. Mr. Jones will
receive additional salary at an initial rate of $35,000 annually as long as the Jones Equity Note remains outstanding and additional salary at a rate of $18,500 annually.

The
Jones Employment Agreement further provides that, upon termination of Mr. Jones' employment due to death or disability, we will pay him or his estate his base salary for the
next 24 months following termination and we will continue to pay him or his estate two times the pro rata portion of his annual bonus. In addition, we will continue to pay him his additional
salary at an initial rate of $35,000 annually, as long as the Jones Equity Note is outstanding, and additional salary of $18,500 annually for the duration of the term of his agreement, and he shall be
entitled to insurance and other specified benefits for the greater of 24 months or the remainder of the term. In the event Mr. Jones is terminated "without cause" (as defined in the
Jones Employment Agreement), he shall continue to be paid his annual bonus for the greater of 24 months or the remainder of the term. Mr. Jones shall also be entitled to receive
additional salary at an initial rate of $35,000 annually, as long as the Jones Equity Note is outstanding, and additional salary of $18,500 annually and insurance and other benefits for the greater of
24 months or the remainder of the term.

Compensation Committee Interlocks and Insider Participation

From October 2001 to January 2002, the Compensation Committee of the Board of Directors was comprised of Scott A. Schoen, Thomas R. Shepherd and
Warren C. Smith, Jr. From January 2002 until July 2002, the Compensation Committee of the Board of Directors was comprised of Scott A. Schoen, Thomas R. Shepherd and Scott L. Jaeckel.
Thereafter, the Compensation Committee of the Board of Directors has been comprised of Thomas R. Shepherd and Philip F. Pellegrino. No member of our Compensation Committee is currently or has been, at
any time since our formation, one of our officers or employees. No member of our Compensation Committee serves a member of the board of directors or compensation committee of any entity that has one
of more executive officers serving as a member of our Board of Directors or Compensation Committee.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our Common Stock as of October 31, 2002 by:



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This
information is based upon information received from or on behalf of the individuals named herein.

Beneficial
ownership is determined in accordance with the rules of the Securities and Exchange Commission. Except as otherwise indicated, we believe that each person or entity named in
the table has sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to applicable community property laws. The percentage of
beneficial ownership set forth below is based upon 32,474,272 shares of Common Stock outstanding as of the close of business on October 31, 2002. In computing the number of shares of Common
Stock beneficially owned by a person and the percentage ownership of that person, shares of Common Stock that are subject to options held by that person that are currently exercisable or exercisable
within 60 days of October 31, 2002, are deemed outstanding. These shares are not, however, deemed outstanding for the purpose of computing the percentage ownership of any other person.
Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Rayovac Corporation, 601 Rayovac Drive, Madison, Wisconsin 53711.

|Names and Address of Beneficial Owner                                        |  | Number
of Shares |     | Number of
Shares Subject
to Options(1) |  | Percent
|---------------------------------------------------------------------------- |  | ---------------- | --- | -------------------------------------- |  | -------
|Wellington Management Company, LLP(2)
75 State Street
Boston, MA 02109       |  | 3,508,645        |     |                                       |  | 10.8   
|J.L. Kaplan Associates, LLC(3)
222 Berkley Street, Ste 2010
Boston, MA 02116 |  | 1,703,568        |     |                                       |  | 5.2    
|David A. Jones                                                               |  | 183,217          | (4) | 576,243                                |  | 2.3    
|Kent J. Hussey                                                               |  | 144,476          | (5) | 224,911                                |  | 1.1    
|Stephen P. Shanesy                                                           |  | 61,553           | (6) | 132,592                                |  | *      
|Merrell M. Tomlin                                                            |  | 61,115           | (7) | 122,763                                |  | *      
|Luis A. Cancio                                                               |  | 62,501           | (8) | 130,875                                |  | *      
|William P. Carmichael                                                        |  |                 |     | 5,000                                  |  | *      
|Thomas R. Shepherd                                                           |  |                 |     | 10,000                                 |  | *      
|John S. Lupo                                                                 |  | 2,500            |     | 15,000                                 |  | *      
|Philip F. Pellegrino                                                         |  | 2,000            |     | 12,000                                 |  | *      
|Barbara S. Thomas                                                            |  |                 |     | 5,000                                  |  | *      
|All directors and executive officers of the Company as a group
(14 persons)  |  | 729,602          | (9) | 1,569,623                              |  | 6.7    

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ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In connection with our recapitalization in 1996, we entered into a Management Agreement with Thomas H. Lee Company pursuant to which Thomas H. Lee Company
provided consulting and management advisory services to us for an initial period of five years through September 12, 2001, with the term renewable on a year-to-year
basis thereafter. The agreement was not renewed upon expiration in September 2002.

In
addition to the Jones Equity Note, we hold various promissory notes described below (together with the Jones Equity Note, the "Executive Notes") from each of the Named Executive
Officers.

Mr. Shanesy
previously executed three five-year promissory notes dated March 17, 1997, August 1, 1997, and September 16, 1997, in connection with
his purchase of shares of Common Stock and exercise of options to purchase shares of Common Stock for a total of $130,002. On May 1, 2002, Mr. Shanesy executed a promissory note
replacing the three previous notes and in the amount of $130,002. Interest on this promissory note is to be adjusted annually to the Internal Revenue Service minimum rate for
3-5 year maturities. This promissory note is secured by a security interest in shares of our Common Stock (including vested options) owned by Mr. Shanesy.

On
July 20, 2000, the Board of Directors authorized additional loans to Messrs. Jones, Hussey, Shanesy, Tomlin and Cancio of up to the aggregate principal amounts of
$1,950,000, $800,000, $200,000, $500,000 and $200,000, respectively. As of August 11, 2000, Messrs. Jones, Hussey, Shanesy, Tomlin and Cancio had each executed a promissory note and, as
of September 30, 2002, had drawn aggregate principal amounts of $1,700,000, $750,000, $200,000, $200,000 and $200,000, respectively, under the authorized loan program. Interest on these
promissory notes is to be adjusted annually to the Internal Revenue Service minimum rate for 3-5 year maturities. Each of these promissory notes is secured by a security interest in
shares of our Common Stock (including vested options) owned by the respective borrower.

The
largest aggregate amount of indebtedness outstanding at any time during fiscal 2002 for each of the Named Executive Officers was as follows: Mr. Jones, $2,200,000;
Mr. Hussey, $750,000; Mr. Shanesy, $330,002; Mr. Tomlin, $200,000; and Mr. Cancio, $200,000. The aggregate amount of indebtedness outstanding as of September 30,
2002, for each of the Named Executive Officers is as

34

---

follows: Mr. Jones, $2,200,000; Mr. Hussey, $750,000; Mr. Shanesy, $330,002; Mr. Tomlin, $200,000; and Mr. Cancio, $200,000.

ITEM 14.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.Our Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act) as of an evaluation date within 90 days prior to the filing
date of this Annual Report on Form 10-K. Based on this evaluation, they have concluded that, as of the evaluation date, our disclosure controls and procedures are effective in alerting them on a
timely basis to material information relating to the Company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.

Changes in Internal Controls.Since the evaluation date referred to above, there have not been any significant changes in our
internal controls or in other factors that could significantly affect such controls.

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K



35

---





RAYOVAC CORPORATION AND SUBSIDIARIES  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND  FINANCIAL STATEMENT SCHEDULE



|                                               
|-----------------------------------------------
|Independent Auditors' Report                   
|Consolidated Balance Sheets                    
|Consolidated Statements of Operations          
|Consolidated Statements of Comprehensive Income
|Consolidated Statements of Shareholders' Equity
|Consolidated Statements of Cash Flows          
|Notes to Consolidated Financial Statements     
|Independent Auditors' Report                   
|Schedule II Valuation and Qualifying Accounts  

F-1

---



Independent Auditors' Report

The
Board of Directors and Shareholders
Rayovac Corporation:

We
have audited the accompanying consolidated balance sheets of Rayovac Corporation and subsidiaries as of September 30, 2001 and 2002, and the related consolidated statements of
operations, comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended September 30, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rayovac Corporation and subsidiaries as of
September 30, 2001 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2002 in conformity
with accounting principles generally accepted in the United States of America.



Milwaukee,
Wisconsin
November 1, 2002

F-2

---



RAYOVAC CORPORATION AND SUBSIDIARIES        Consolidated Balance Sheets        September 30, 2001 and 2002        (In thousands, except per share amounts)

|                                                     |                                                                                                                                                            | 2001                                                                                                    |                                            | 2002                      |        
|---------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------- | -------
|Assets                                               |                                                                                                                                                           
|Current assets:                                      |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     | Cash and cash equivalents                                                                                                                                  |                                                                                                         | $                                          | 11,358                    |        
|                                                     | Receivables:                                                                                                                                               |                                                                                                         |                                            |                           |        
|                                                     |                                                                                                                                                            | Trade accounts receivable, net of allowance for doubtful receivables of $2,139 and $3,293, respectively |                                            |                           | 160,943
|                                                     |                                                                                                                                                            | Other                                                                                                   |                                            |                           | 7,802  
|                                                     | Inventories                                                                                                                                                |                                                                                                         |                                            | 91,311                    |        
|                                                     | Deferred income taxes                                                                                                                                      |                                                                                                         |                                            | 9,831                     |        
|                                                     | Prepaid expenses and other                                                                                                                                 |                                                                                                         |                                            | 21,843                    |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | Total current assets                       |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|Property, plant and equipment, net                   |                                                                                                                                                            |                                                                                                         | 107,257                                    |                           |        
|Deferred charges and other                           |                                                                                                                                                            |                                                                                                         | 32,617                                     |                           |        
|Intangible assets, net                               |                                                                                                                                                            |                                                                                                         | 119,074                                    |                           |        
|Debt issuance costs                                  |                                                                                                                                                            |                                                                                                         | 4,463                                      |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     | Total assets                                                                                                                                               |                                                                                                         | $                                          | 566,499                   |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|Liabilities and Shareholders' Equity                 |                                                                                                                                                           
|Current liabilities:                                 |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     | Current maturities of long-term debt                                                                                                                       |                                                                                                         | $                                          | 24,436                    |        
|                                                     | Accounts payable                                                                                                                                           |                                                                                                         |                                            | 81,990                    |        
|                                                     |                                                                                                                                                            | Accrued liabilities:                                                                                    |                                            |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | Wages and benefits                         |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | Accrued interest                           |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | Other special charges                      |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | Other                                      |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            | Total current liabilities |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|Long-term debt, net of current maturities            |                                                                                                                                                            |                                                                                                         | 233,541                                    |                           |        
|Employee benefit obligations, net of current portion |                                                                                                                                                            |                                                                                                         | 19,648                                     |                           |        
|Deferred income taxes                                |                                                                                                                                                            |                                                                                                         | 7,428                                      |                           |        
|Other                                                |                                                                                                                                                            |                                                                                                         | 3,756                                      |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | Total liabilities                          |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|Shareholders' equity:                                |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     | Common stock, $.01 par value, authorized 150,000 shares; issued 61,579 and 61,594 shares, respectively; outstanding 32,043 and 32,058 shares, respectively |                                                                                                         |                                            | 616                       |        
|                                                     | Additional paid-in capital                                                                                                                                 |                                                                                                         |                                            | 180,752                   |        
|                                                     | Retained earnings                                                                                                                                          |                                                                                                         |                                            | 119,984                   |        
|                                                     | Accumulated other comprehensive loss                                                                                                                       |                                                                                                         |                                            | (6,868                    | )      
|                                                     | Notes receivable from officers/shareholders                                                                                                                |                                                                                                         |                                            | (3,665                    | )      
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | 290,819                                    |                           |        
|Less treasury stock, at cost, 29,536 shares          |                                                                                                                                                            |                                                                                                         | (130,070                                   | )                         |        
|Less unearned restricted stock compensation          |                                                                                                                                                            |                                                                                                         | (3,164                                     | )                         |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | Total shareholders' equity                 |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        
|                                                     |                                                                                                                                                            |                                                                                                         | Total liabilities and shareholders' equity |                           | $      
|                                                     |                                                                                                                                                            |                                                                                                         |                                            |                           |        

See accompanying notes to consolidated financial statements.

F-3

---



RAYOVAC CORPORATION AND SUBSIDIARIES        Consolidated Statements of Operations        Years ended September 30, 2000, 2001 and 2002        (In thousands, except per share amounts)

|                                                                                              |                                  | 2000 |         | 2001    |   | 2002   
|--------------------------------------------------------------------------------------------- | -------------------------------- | ---- | ------- | ------- | - | -------
|Net sales                                                                                     |                                  | $    | 630,914 |         | $ | 616,172
|Cost of goods sold                                                                            |                                  |      | 371,470 |         |   | 361,173
|Special charges                                                                               |                                  |      |        |         |   | 22,103 
|                                                                                              |                                  |      |         |         |   |        
|Gross profit                                                                                  |                                  |      | 259,444 |         |   | 232,896
|Operating expenses:                                                                           |                                  |      |         |         |   |        
|                                                                                              | Selling                          |      |         | 110,559 |   |        
|                                                                                              | General and administrative       |      |         | 48,791  |   |        
|                                                                                              | Research and development         |      |         | 10,763  |   |        
|                                                                                              | Special charges                  |      |         |        |   |        
|                                                                                              |                                  |      |         |         |   |        
|                                                                                              |                                  |      | 170,113 |         |   | 178,527
|                                                                                              |                                  |      |         |         |   |        
|Income from operations                                                                        |                                  |      | 89,331  |         |   | 54,369 
|Interest expense                                                                              |                                  |      | 30,626  |         |   | 27,189 
|Other expense, net                                                                            |                                  |      | 753     |         |   | 1,094  
|                                                                                              |                                  |      |         |         |   |        
|Income before income taxes and extraordinary item                                             |                                  |      | 57,952  |         |   | 26,086 
|Income tax expense                                                                            |                                  |      | 19,602  |         |   | 9,225  
|                                                                                              |                                  |      |         |         |   |        
|Income before extraordinary item                                                              |                                  |      | 38,350  |         |   | 16,861 
|Extraordinary item, loss on early extinguishment of debt, net of income tax benefit of $3,260 |                                  |      |        |         |   | (5,327 
|                                                                                              |                                  |      |         |         |   |        
|Net income                                                                                    |                                  | $    | 38,350  |         | $ | 11,534 
|                                                                                              |                                  |      |         |         |   |        
|Basic net income per common share:                                                            |                                  |      |         |         |   |        
|                                                                                              | Income before extraordinary item |      | $       | 1.39    |   | $      
|                                                                                              | Extraordinary item               |      |         |        |   |        
|                                                                                              |                                  |      |         |         |   |        
|Net income                                                                                    |                                  | $    | 1.39    |         | $ | 0.40   
|                                                                                              |                                  |      |         |         |   |        
|Weighted average shares of common stock outstanding                                           |                                  |      | 27,504  |         |   | 28,746 
|                                                                                              |                                  |      |         |         |   |        
|Diluted net income per common share:                                                          |                                  |      |         |         |   |        
|                                                                                              | Income before extraordinary item |      | $       | 1.32    |   | $      
|                                                                                              | Extraordinary item               |      |         |        |   |        
|                                                                                              |                                  |      |         |         |   |        
|Net income                                                                                    |                                  | $    | 1.32    |         | $ | 0.39   
|                                                                                              |                                  |      |         |         |   |        
|Weighted average shares of common stock and equivalents outstanding                           |                                  |      | 29,069  |         |   | 29,702 
|                                                                                              |                                  |      |         |         |   |        

See
accompanying notes to consolidated financial statements.

F-4

---



RAYOVAC CORPORATION AND SUBSIDIARIES        Consolidated Statements of Comprehensive Income        Years ended September 30, 2000, 2001 and 2002        (In thousands)

|                                 |                                                                                                                          | 2000 |        | 2001   |   | 2002   |       
|-------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ---- | ------ | ------ | - | ------ | ------
|Net income                       |                                                                                                                          | $    | 38,350 |        | $ | 11,534 |       
|Other comprehensive income:      |                                                                                                                          |      |        |        |   |        |       
|                                 | Foreign currency translation adjustment                                                                                  |      |        | (1,964 | ) |        | (1,141
|                                 | Cumulative effect of accounting change, net of tax effect of ($167)                                                      |      |        |       |   |        | (150  
|                                 | Loss on derivative instruments and available for sale securities, net of tax effect of ($1,973) and ($689), respectively |      |        |       |   |        | (2,929
|                                 | Minimum pension liability adjustment, net of tax effect of $223, ($1,776), and ($1,959), respectively                    |      |        | 415    |   |        | (3,298
|                                 |                                                                                                                          |      |        |        |   |        |       
|Comprehensive income, net of tax |                                                                                                                          | $    | 36,801 |        | $ | 4,016  |       
|                                 |                                                                                                                          |      |        |        |   |        |       

See
accompanying notes to consolidated financial statements.

F-5

---

RAYOVAC CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended September 30, 2000, 2001 and 2002
(In thousands)

|                                                                     |  |        |   |   |     |  |   |         |   | Accumulated Other Comprehensive Income (Loss) |         |  |   |        |   |   |        |   |  
|-------------------------------------------------------------------- |  | ------ | - | - | --- |  | - | ------- | - | --------------------------------------------- | ------- |  | - | ------ | - | - | ------ | - | -
|
|
|
|
|Balances at September 30, 1999                                       |  | 27,490 |   | $ | 570 |  | $ | 103,577 |   | $                                             | 70,100  |  | $ | 2,666  |   | $ |       |   | $
|Net income                                                           |  |       |   |   |    |  |   |        |   |                                               | 38,350  |  |   |       |   |   |       |   |  
|Treasury stock acquired                                              |  | (51    | ) |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Exercise of stock options                                            |  | 131    |   |   | 1   |  |   | 620     |   |                                               |        |  |   |       |   |   |       |   |  
|Notes receivable from officers/shareholders                          |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Adjustment of additional minimum pension liability                   |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Translation adjustment                                               |  |       |   |   |    |  |   |        |   |                                               |        |  |   | (1,964 | ) |   |       |   |  
|                                                                     |  |        |   |   |     |  |   |         |   |                                               |         |  |   |        |   |   |        |   |  
|Balances at September 30, 2000                                       |  | 27,570 |   |   | 571 |  |   | 104,197 |   |                                               | 108,450 |  |   | 702    |   |   |       |   |  
|Net income                                                           |  |       |   |   |    |  |   |        |   |                                               | 11,534  |  |   |       |   |   |       |   |  
|Sale of common stock                                                 |  | 3,500  |   |   | 35  |  |   | 64,144  |   |                                               |        |  |   |       |   |   |       |   |  
|Issuance of restricted stock                                         |  | 277    |   |   | 3   |  |   | 4,743   |   |                                               |        |  |   |       |   |   |       |   |  
|Treasury stock acquired                                              |  | (5     | ) |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Exercise of stock options                                            |  | 701    |   |   | 7   |  |   | 7,668   |   |                                               |        |  |   |       |   |   |       |   |  
|Notes receivable from officers/shareholders                          |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Amortization of unearned compensation                                |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Adjustment of additional minimum pension liability                   |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Translation adjustment                                               |  |       |   |   |    |  |   |        |   |                                               |        |  |   | (1,141 | ) |   |       |   |  
|Cumulative effect of accounting change                               |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   | (150   | ) |  
|Net loss on derivative instruments and available for sale securities |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   | (2,929 | ) |  
|                                                                     |  |        |   |   |     |  |   |         |   |                                               |         |  |   |        |   |   |        |   |  
|Balances at September 30, 2001                                       |  | 32,043 |   |   | 616 |  |   | 180,752 |   |                                               | 119,984 |  |   | (439   | ) |   | (3,079 | ) |  
|Net income                                                           |  |       |   |   |    |  |   |        |   |                                               | 29,237  |  |   |       |   |   |       |   |  
|Forfeiture of restricted stock                                       |  | (24    | ) |   |    |  |   | (413    | ) |                                               |        |  |   |       |   |   |       |   |  
|Issuance of restricted stock                                         |  | 24     |   |   |    |  |   | 313     |   |                                               |        |  |   |       |   |   |       |   |  
|Exercise of stock options                                            |  | 15     |   |   |    |  |   | 171     |   |                                               |        |  |   |       |   |   |       |   |  
|Notes receivable from officers/shareholders                          |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Amortization of unearned compensation                                |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Adjustment of additional minimum pension liability                   |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   |       |   |  
|Translation adjustment                                               |  |       |   |   |    |  |   |        |   |                                               |        |  |   | (7,875 | ) |   |       |   |  
|Net loss on derivative instruments and available for sale securities |  |       |   |   |    |  |   |        |   |                                               |        |  |   |       |   |   | (1,477 | ) |  
|                                                                     |  |        |   |   |     |  |   |         |   |                                               |         |  |   |        |   |   |        |   |  
|Balances at September 30, 2002                                       |  | 32,058 |   | $ | 616 |  | $ | 180,823 |   | $                                             | 149,221 |  | $ | (8,314 | ) | $ | (4,556 | ) | $
|                                                                     |  |        |   |   |     |  |   |         |   |                                               |         |  |   |        |   |   |        |   |  

See accompanying notes to consolidated financial statements.

F-6

---



RAYOVAC CORPORATION AND SUBSIDIARIES        Consolidated Statements of Cash Flows        Years ended September 30, 2000, 2001 and 2002        (In thousands)

|                                                             |                                                                                   | 2000 |         | 2001     |   | 2002    |         
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | ---- | ------- | -------- | - | ------- | --------
|Cash flows from operating activities:                        |                                                                                   |      |         |          |   |         |         
|                                                             | Net income                                                                        |      | $       | 38,350   |   | $       | 11,534  
|                                                             | Adjustments to reconcile net income to net cash provided by operating activities: |      |         |          |   |         |         
|                                                             | Extraordinary item, loss on early retirement of debt                              |      |         |         |   |         | 8,587   
|                                                             | Amortization                                                                      |      |         | 6,309    |   |         | 5,608   
|                                                             | Depreciation                                                                      |      |         | 16,024   |   |         | 17,667  
|                                                             | Deferred income taxes                                                             |      |         | 2,905    |   |         | (3,751  
|                                                             | Non-cash restructuring charges                                                    |      |         |         |   |         | 9,958   
|                                                             | Stock option income tax benefit                                                   |      |         | 625      |   |         | 4,348   
|                                                             | Amortization of unearned restricted stock compensation                            |      |         |         |   |         | 1,582   
|                                                             | (Gain) loss on disposal of fixed assets                                           |      |         | (1,297   | ) |         | 187     
|Changes in assets and liabilities:                           |                                                                                   |      |         |          |   |         |         
|                                                             | Accounts receivable                                                               |      |         | (16,140  | ) |         | (35,844 
|                                                             | Inventories                                                                       |      |         | (20,344  | ) |         | 5,168   
|                                                             | Prepaid expenses and other assets                                                 |      |         | (5,416   | ) |         | (1,657  
|                                                             | Accounts payable and accrued liabilities                                          |      |         | 16,973   |   |         | (10,223 
|                                                             | Accrued special charges                                                           |      |         | (5,147   | ) |         | 4,883   
|                                                             |                                                                                   |      |         |          |   |         |         
|Net cash provided by operating activities                    |                                                                                   |      | 32,842  |          |   | 18,047  |         
|                                                             |                                                                                   |      |         |          |   |         |         
|Cash flows from investing activities:                        |                                                                                   |      |         |          |   |         |         
|                                                             | Purchases of property, plant and equipment                                        |      |         | (18,996  | ) |         | (19,693 
|                                                             | Investments in available for sale securities                                      |      |         |         |   |         | (797    
|                                                             | Proceeds from sale of property, plant and equipment                               |      |         | 1,051    |   |         | 863     
|                                                             | Proceeds from sale of investments                                                 |      |         |         |   |         | 1,354   
|                                                             |                                                                                   |      |         |          |   |         |         
|Net cash used by investing activities                        |                                                                                   |      | (17,945 | )        |   | (18,273 | )       
|                                                             |                                                                                   |      |         |          |   |         |         
|Cash flows from financing activities:                        |                                                                                   |      |         |          |   |         |         
|                                                             | Reduction of debt                                                                 |      |         | (215,394 | ) |         | (416,699
|                                                             | Proceeds from debt financing                                                      |      |         | 203,189  |   |         | 421,914 
|                                                             | Debt issuance costs                                                               |      |         |         |   |         |        
|                                                             | Loans to officers/shareholders                                                    |      |         | (2,300   | ) |         | (475    
|                                                             | Issuance of stock                                                                 |      |         |         |   |         | 64,179  
|                                                             | Acquisition of treasury stock                                                     |      |         | (886     | ) |         | (88     
|                                                             | Exercise of stock options                                                         |      |         | 621      |   |         | 3,327   
|                                                             | Extinguishment of debt                                                            |      |         |         |   |         | (69,652 
|                                                             | Payments on capital lease obligation                                              |      |         | (1,233   | ) |         | (837    
|                                                             |                                                                                   |      |         |          |   |         |         
|Net cash (used) provided by financing activities             |                                                                                   |      | (16,003 | )        |   | 1,669   |         
|                                                             |                                                                                   |      |         |          |   |         |         
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |      | (202    | )        |   | 158     |         
|                                                             |                                                                                   |      |         |          |   |         |         
|Net (decrease) increase in cash and cash equivalents         |                                                                                   |      | (1,308  | )        |   | 1,601   |         
|Cash and cash equivalents, beginning of period               |                                                                                   |      | 11,065  |          |   | 9,757   |         
|                                                             |                                                                                   |      |         |          |   |         |         
|Cash and cash equivalents, end of period                     |                                                                                   | $    | 9,757   |          | $ | 11,358  |         
|                                                             |                                                                                   |      |         |          |   |         |         
|Supplemental disclosure of cash flow information:            |                                                                                   |      |         |          |   |         |         
|                                                             | Cash paid for interest                                                            |      | $       | 27,691   |   | $       | 28,938  
|                                                             | Cash paid for income taxes                                                        |      |         | 14,318   |   |         | 8,166   

See accompanying notes to consolidated financial statements.

F-7

---



RAYOVAC CORPORATION AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (In thousands, except per share amounts)

(1) Description of Business

Rayovac Corporation and its wholly owned subsidiaries (Company) manufacture and market batteries. Products include general (alkaline, rechargeables, heavy duty,
lantern and general purpose), button cell and lithium batteries. The Company also produces a variety of battery powered lighting devices such as flashlights and lanterns. The Company's products are
sold primarily to retailers in the United States, Canada, Latin America, Europe, and the Far East.

(2) Significant Accounting Policies and Practices



F-8

---



Location

Expiration DateMexico City, Mexico

February 2003Madison, WI

August 2003Washington, UK Production

December 2003Guatemala City, Guatemala

March 2004Fennimore, WI

March 2005Portage, WI

June 2006




F-9

---



Building and improvements

20-30 yearsMachinery, equipment and other

2-15 years




F-10

---



F-11

---



2000

2001

2002Basic

27,504

28,746

31,775Effect of restricted stock and assumed conversion of stock options

1,565

956

639Diluted

29,069

29,702

32,414




F-12

---



F-13

---



F-14

---



F-15

---



2000

2001

2002Reported net income

$
38,350

$
11,534

$
29,237Add back: Goodwill amortization, net of tax of $0


1,241


1,050


Add back: Trade name amortization, net of tax of $855


1,395


1,395


Adjusted net income

$
40,986

$
13,979

$
29,237Basic Earnings Per Share:Reported net income

$
1.39

$
0.40

$
0.92Goodwill amortization


0.05


0.04


Trade name amortization


0.05


0.05


Adjusted net income

$
1.49

$
0.49

$
0.92Diluted Earnings Per Share:Reported net income

$
1.32

$
0.39

$
0.90Goodwill amortization


0.04


0.03


Trade name amortization


0.05


0.05


Adjusted net income

$
1.41

$
0.47

$
0.90




F-16

---



(3) Inventories

Inventories consist of the following:

September 30,2001

2002Raw materials

$
24,271

$
19,893Work-in-process


14,015


19,004Finished goods


53,025


45,378$
91,311

$
84,275


(4) Property, Plant and Equipment

Property, plant and equipment consist of the following:

September 30,2001

2002Land, buildings and improvements

$
34,350

$
34,559Machinery, equipment and other


175,724


184,087Construction in process


11,271


10,303221,345


228,949Less accumulated depreciation


114,088


126,363$
107,257

$
102,586


Machinery,
equipment and other includes capitalized leases, net of amortization, totaling $1,242 and $615 at September 30, 2001 and 2002, respectively.

F-17

---



(5) Intangible Assets

Intangible assets consist of the following:

|                              |  | 2001 |        | 2002
|----------------------------- |  | ---- | ------ | ----
|
|Amortized Intangible Assets   |  |      |        |     
|Non-compete agreement         |  | $    | 700    |     
|Proprietary technology        |  |      | 525    |     
|                              |  |      |        |     
|                              |  | $    | 1,225  |     
|                              |  |      |        |     
|Pension Intangibles           |  |      |        |     
|Under-funded pension          |  | $    | 3,081  |     
|                              |  |      |        |     
|Unamortized Intangible Assets |  |      |        |     
|Trade name                    |  | $    | 90,000 |     
|                              |  |      |        |     

|                                      |  | North
America |       | Latin
America |   | Europe/ROW |  | Total
|------------------------------------- |  | ------------- | ----- | ------------- | - | ---------- |  | -----
|Goodwill                              |  |               |       |               |   |            |  |      
|Balance as of September 30, 2001, net |  | $             | 1,035 |               | $ | 26,884     |  | $    
|Effect of translation                 |  |               |      |               |   |           |  |      
|                                      |  |               |       |               |   |            |  |      
|Balance as of September 30, 2002, net |  | $             | 1,035 |               | $ | 26,884     |  | $    
|                                      |  |               |       |               |   |            |  |      

The
non-compete agreement is being amortized on a straight-line basis over 5 years. The proprietary technology assets are being amortized on a
straight-line basis over 15 to 17 years.

The
trade name and Latin America segment goodwill are associated with the 1999 acquisition of ROV Limited and were being amortized on a straight-line basis over
40 years. The North America segment goodwill is associated with the 1998 acquisition of Best Labs and was being amortized on a straight-line basis over 15 years. The
Europe/ROW segment goodwill is associated with the 1998 acquisition of Brisco GmbH in Germany and was being amortized on a straight-line basis over 15 years.

Pursuant
to Statement No. 142, the Company ceased amortizing goodwill on October 1, 2001. Upon initial application of Statement No. 142, the Company reassessed the
useful lives of its intangible assets and deemed only the trade name asset to have an indefinite useful life because it is expected to generate cash flows indefinitely. Based on this, the Company
ceased amortizing the trade name on October 1, 2001.

The
amortization expense for 2000, 2001, and 2002 are as follows:

2000

2001

2002Amortization ExpenseGoodwill amortization

$
1,241

$
1,050

$
Trade name amortization


2,250


2,250


Non-compete and proprietary technology


429


173


173$
3,920

$
3,473

$
173


F-18

---

(6) Debt

Debt consists of the following:

September 30,2001

2002Revolving credit facility

$
213,200

$
174,500Term loan facility


34,365


23,061Series B Senior Subordinated Notes, due November 1, 2006, with interest at 101/4% payable semi-annually


239


Capitalized lease obligations


1,098


500Notes and obligations, weighted-average interest rate of 3.77% at September 30, 2002


9,075


3,810257,977


201,871Less current maturities


24,436


13,400Long-term debt

$
233,541

$
188,471


In
1999, the Company entered into an Amended and Restated Credit Agreement ("Second Restated Agreement"). The Second Restated Agreement provided for senior bank facilities, including
term and revolving credit facilities in an aggregate amount of $325,000. Interest on borrowings was computed, at the Company's option, based on the base rate, as defined ("Base Rate"), or the
Interbank Offering Rate ("IBOR"). Indebtedness under these amended facilities was secured by substantially all of the assets of the Company and was guaranteed by certain of our subsidiaries. The
Company recorded fees paid as a result of the amendments as a debt issuance cost which was being amortized over the remaining life of the Second Restated Agreement.

The
term facility included in the Second Restated Agreement initially totaled $75,000. The facility provided for quarterly amortization totaling $10,000 in 2000, $15,000 in 2001, 2002
and 2003, and $20,000 in 2004. The term facility also provided for annual prepayments, over and above the normal amortization. Such payments would be a portion of "Excess Cash Flow" (EBITDA less
certain operating expenditures including scheduled principal payments of long-term debt). The quarterly amortization is reduced prorata for the effect of prepayments made as a result of
Excess Cash Flow.

The
Second Restated Agreement was subsequently amended over time primarily to permit increased levels of: letters of credit, capital spending, loans to employees and investments by a
domestic subsidiary in a foreign subsidiary; and amend the definition of EBITDA to exclude certain non-recurring charges including a bad debt reserve for the Kmart bankruptcy.

Interest
on these borrowings was at the Base Rate plus a margin (0.00% to 0.75%) per annum (5.00% at September 30, 2002) or IBOR plus a margin (0.75% to 1.75%) per annum. The
Company was required to pay a commitment fee (0.25% to 0.50%) per annum (0.375% at September 30, 2002) on the average daily-unused portion of the revolving facility. The Company had outstanding
letters of credit of approximately $5,750 at September 30, 2002. A fee (0.75% to 1.75%) per annum (1.25% at September 30, 2002) was payable on the outstanding letters of credit. The
Company also incured a fixed fee of 0.25% per annum of the average daily maximum amount available to be drawn on each letter of credit issued. The facilities' margin, revolving commitment fee and fees
on outstanding letters of credit could be adjusted if the Company's leverage ratio, as defined, increased or decreased.

F-19

---

The
Second Restated Agreement contained financial covenants with respect to borrowings which included maintaining minimum interest coverage and maximum leverage ratios. In accordance
with the Agreement, the limits imposed by such ratios became more restrictive over time. In addition, the Second Restated Agreement restricted the Company's ability to incur additional indebtedness,
create liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures, and merge or acquire or sell assets.

The
Series B Senior Subordinated Notes ("Notes"), initially scheduled to mature on November 1, 2006, were redeemed in connection with the Company's initial public offering
of common stock, and a subsequent primary offering, with the final residual amount redeemed in November 2001.

The
Company entered into no new capital leases in 2002. Aggregate capitalized lease obligations are payable in installments of $340 in 2003 and $160 in 2004.

In
connection with the acquisition of the consumer battery business of VARTA AG on October 1, 2002, the Company entered into an Amended and Restated Credit Agreement
("Third Restated Agreement") which replaced the Second Restated Agreement discussed above. The Third Restated Agreement provides for senior bank facilities, including term and revolving credit
facilities in an initial aggregate amount (assuming an exchange rate of the Euro to the Dollar of 1 to 1) of approximately $625,000. The Third Restated Agreement includes a $100,000 seven-year
revolving credit facility, a EUR 50,000 seven-year revolving facility, a $300,000 seven-year amortizing term loan, a EUR 125,000 seven-year amortizing term loan and a EUR 50,000 six-year amortizing
term loan. The U.S. Dollar revolving credit facility may be increased, at the Company's option, by up to $50,000.

The
interest on Dollar-denominated borrowings is computed, at the Company's option, based on the base rate, as defined ("Base Rate"), or the London Interbank Offered Rate ("LIBOR") for
Dollar-denominated deposits. The interest on Euro-denominated borrowings is computed on LIBOR for Euro-denominated deposits. The fees associated with these facilities will be
capitalized and amortized over the term of the facilities. Unamortized fees associated with the replaced facilities above will be written off as a charge to earnings in the quarter ending
December 29, 2002. Indebtedness under these amended facilities is secured by substantially all of the assets of the Company, is guaranteed by certain of our subsidiaries and the
Euro-denominated revolving facility is subject to a borrowing base ("Borrowing Base") of certain European assets.

The
term facilities provide for quarterly amortization totaling (assuming an exchange rate of the Euro to the Dollar of 1 to 1) of approximately $9,250 in 2003 and 2004, $14,250
in 2005, 2006, and 2007, $61,250 in 2008 and $352,500 in 2009. The term facility also provides for annual prepayments, over and above the normal amortization. Such payments would be a portion of
"Excess Cash Flow" (EBITDA, as defined, less certain operating expenditures including scheduled principal payments of long-term debt). The quarterly amortization is reduced prorata for the
effect of prepayments made as a result of Excess Cash Flow.

Interest
on Dollar-denominated revolving borrowings is, at the Company's option, at the Base Rate plus a margin (1.25% to 2.50%) per annum or Dollar-denominated LIBOR plus a margin
(2.25% to 3.50%) per annum. Interest on Euro-denominated revolving borrowings and the Euro-denominated six-year term loan is Euro-denominated LIBOR plus
a margin (2.25% to 3.50%) per annum (6.58% at October 1, 2002). Interest on the Dollar-denominated seven-year term loan is, at the Company's option, at the Base Rate plus a fixed
2.75% margin per annum or Dollar-denominated LIBOR plus a

F-20

---

fixed 3.75% margin per annum (5.57% at October 1, 2002). Interest on the Euro-denominated seven-year term loan is Euro-denominated LIBOR plus a fixed 3.75%
margin per annum (7.08% at October 1, 2002). The Company is required to pay a commitment fee of 0.50% per annum on the average daily-unused portion of the revolving facilities. A fee (2.25% to
3.50%) per annum (3.25% at October 1, 2002) is payable on the outstanding letters of credit. The Company also incurs a fee of 0.25% per annum of the average daily maximum amount available to be
drawn on each letter of credit issued. The margin on the revolving facilities, six-year amortizing term loan and fees on outstanding letters of credit may be adjusted if the Company's
leverage ratio, as defined, increases or decreases.

The
Third Restated Agreement contains financial covenants with respect to borrowings which include maintaining minimum interest and fixed charge and maximum leverage ratios. In
accordance with the Agreement, the limits imposed by such ratios become more restrictive over time. In addition, the Third Restated Agreement restricts the Company's ability to incur additional
indebtedness, create liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures, and merge or acquire or sell assets.

The
aggregate scheduled maturities of debt as of October 1, 2002 are as follows: (1)

2003

$
13,4002004


9,4112005


14,2502006


14,2502007


14,250Thereafter


413,750$
479,311


---

(7) Shareholders' Equity

On October 1, 2000, the Company granted approximately 277 shares of restricted stock to certain members of management. The total market value of the
restricted shares on date of grant was approximately $4,746 and has been recorded as unearned compensation as a separate component of shareholders' equity. During 2002, the Company recognized the
forfeiture of approximately 24 restricted shares of stock. The total market value on the date of grant for the forfeited shares was approximately $413 and has been recorded as an adjustment to
unearned compensation. Approximately 186 of these shares will vest on September 30, 2003 provided the recipient is still employed by the
Company. The remainder vests one third each year from the date of grant. Unearned compensation is being amortized to expense over the three-year vesting period.

On
June 22, 2001, the Company completed a primary offering of 3,500 shares of Common stock. The net proceeds of approximately $64,200 after deducting the underwriting discounts
and offering expenses, were used to repurchase approximately $64,800 principal amount of 101/4% Series B Senior Subordinated Notes.

F-21

---

Concurrently,
the Thomas H. Lee Group and its affiliates sold approximately 4,200 shares and certain Rayovac officers and employees sold approximately 900 shares in a secondary offering
of Common stock. The Company did not receive any proceeds from the sales of the secondary offering shares but incurred expenses for the offering of approximately $200 which are included in Special
Charges.

On
August 16, 2002, the Company granted approximately 24 shares of restricted stock to a certain member of management. These shares will vest on September 30, 2003 provided
the recipient is still employed with the Company. The total market value of the restricted shares on the date of grant was approximately $313 and has been recorded as unearned compensation as a
separate component of shareholders' equity. Unearned compensation is being amortized over a 13 month vesting period.

(8) Stock Option Plans

In 1996, the Company's Board of Directors ("Board") approved the Rayovac Corporation 1996 Stock Option Plan ("1996 Plan"). Under the 1996 Plan, stock options to
acquire up to 2,318 shares of Common stock, in the aggregate, may be granted to select employees and directors of the Company under either or both a time-vesting or a performance-vesting
formula at an exercise price equal to the market price of the Common stock on the date of grant. The time-vesting options become exercisable primarily in equal 20% increments over a
five-year period. The performance-vesting options become exercisable at the end of ten years with accelerated vesting over each of the first five years if the Company achieves certain
performance goals. Accelerated vesting may occur upon sale of the Company, as defined in the 1996 Plan. As of September 30, 2002, there were options with respect to 1,237 shares of Common stock
outstanding under the 1996 Plan.

In
1997, the Board adopted the 1997 Rayovac Incentive Plan ("Incentive Plan"). The Incentive Plan replaces the 1996 Plan and no further awards will be granted under the 1996 Plan other
than awards of options for shares up to an amount equal to the number of shares covered by options that terminate or expire prior to being exercised. Under the Incentive Plan, the Company may grant to
employees and non-employee directors stock options, stock appreciation rights ("SARs"), restricted stock, and other stock-based awards, as well as cash-based annual and
long-term incentive awards. Accelerated vesting will
occur in the event of a change in control, as defined in the Incentive Plan. Up to 5,000 shares of Common stock may be issued under the Incentive Plan. The Incentive Plan expires in
August 2007. As of September 30, 2002, there were options with respect to 2,868 shares of Common stock outstanding under the Incentive Plan.

F-22

---

A
summary of the status of the Company's plans is as follows:

|                                   |  | 2000  |   | 2001 |       | 2002
|---------------------------------- |  | ----- | - | ---- | ----- | ----
|
|Outstanding, beginning of period   |  | 2,832 |   | $    | 9.14  |     
|Granted                            |  | 729   |   |      | 21.62 |     
|Exercised                          |  | (132  | ) |      | 4.71  |     
|Forfeited                          |  | (153  | ) |      | 8.39  |     
|                                   |  |       |   |      |       |     
|Outstanding, end of period         |  | 3,276 |   | $    | 12.15 |     
|                                   |  |       |   |      |       |     
|Options exercisable, end of period |  | 1,325 |   | $    | 7.67  |     
|                                   |  |       |   |      |       |     

The
Company also granted approximately 277 and 24 shares of restricted stock during 2001 and 2002, respectively, under the Incentive Plan. The restrictions lapse over the three-year
period ending September 30, 2003. As of September 30, 2002, the restrictions had lapsed on 44 of these shares and the Company recognized the forfeiture of 24 of these shares.

The
following table summarizes information about options outstanding and outstanding and exercisable as of September 30, 2002:

|                 |  | Options Outstanding |  | Options Outstanding
and Exercisable
|---------------- |  | ------------------- |  | -----------------------------------
|
|$4.39            |  | 1,009               |  | 4 years                            
|$13.00  $20.938 |  | 2,246               |  | 8.1                                
|$21.25  $29.50  |  | 850                 |  | 6.7                                

The
Company has adopted the provisions of Statement No. 123,Accounting for Stock-Based Compensation,and continues to apply
Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock plans. Accordingly, the Company recognized $1,582 and $1,331, respectively, of compensation
cost, before tax, related to restricted stock in 2001 and 2002, respectively, and no compensation cost, before tax, related to options for the stock plans. If the Company had elected to recognize
compensation cost for all of the plans based upon the fair value at the grant dates for awards under those plans, consistent with an alternative method prescribed by Statement No. 123, net
income per common share would have been reduced to the pro forma amounts indicated below:

2000

2001

2002Net income reported

$
38,350

$
11,534

$
29,237Pro forma net income

$
35,887

$
7,932

$
25,271Pro forma basic net income per common share

$
1.30

$
0.28

$
0.80Pro forma diluted net income per common share

$
1.23

$
0.27

$
0.78


F-23

---

The
fair value of the Company's stock options used to compute pro forma net income and basic and diluted net income per common share disclosures is the estimated fair value at grant date
using the Black-Scholes option-pricing model with the following weighted-average assumptions:

2000

2001

2002Assumptions used:Volatility

28.6%

34.7%

37.6%Risk-free interest rate

6.17%

4.48%

3.40%Expected life

8 years

8 years

8 yearsDividend yield





Weighted-average grant-date fair value of options granted during period

$10.49

$7.27

$6.89


The
Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's options have characteristics significantly
different from traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in the opinion of management, the existing models do not
necessarily provide a reliable single value of its options and may not be representative of the future effects on reported net income or the future stock price of the
Company. For purposes of proforma disclosure, the estimated fair value of the options is amortized to expense over the option's vesting period.

F-24

---

(9) Income Taxes

Pretax income (income before income taxes and extraordinary item) and income tax expense consist of the following:

2000

2001

2002Pretax income (loss):United States

$
30,383

$
13,660

$
47,288Outside the United States


27,569


12,426


(1,605
)Total pretax income

$
57,952

$
26,086

$
45,683Income tax expense (benefit):Current:Federal

$
7,850

$
6,617

$
10,484Foreign


8,142


6,217


895State


705


142


204Total current


16,697


12,976


11,583Deferred:Federal


2,032


(1,977
)

6,666Foreign


731


(1,638
)

(2,374
)State


142


(136
)

571Total deferred


2,905


(3,751
)

4,863$
19,602

$
9,225

$
16,446


In
2001, a tax benefit of $3,260 was recorded in conjunction with the loss on the early extinguishment of debt.

The
following reconciles the Federal statutory income tax rate with the Company's effective tax rate:

2000

2001

2002Statutory Federal income tax rate

35.0
%
35.0
%
35.0
%Foreign Sales Corporation/Extraterritorial Income Exclusion benefit

(0.6
)
(1.4
)
(0.6
)Effect of foreign items and rate differentials

(0.9
)
0.8

(0.1
)State income taxes and other

1.0

1.3

1.5Adjustment of prior year taxes

(1.3
)
(1.4
)
0.2Other

0.6

1.1

0.033.8
%
35.4
%
36.0
%


F-25

---

The
tax effects of temporary differences which give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

September 30,2001

2002Current deferred tax assets:Employee benefits

$


$
970Restructuring and asset impairments


3,151


212Inventories and receivables


3,019


2,105Marketing and promotional accruals


2,113


351Tax loss carry forwards


2,348


1,861Currency hedges


1,731


1,370Other


1,856


1,717Total current deferred tax assets


14,218


8,586Current deferred tax liabilities:Inventories


(2,494
)

Other


(1,389
)

Total current deferred tax liabilities


(3,883
)

Net current deferred tax assets

$
10,335

$
8,586Noncurrent deferred tax assets:Employee benefits

$
3,462

$
5,103Operating loss and credit carry forwards


1,328


4,163Property, plant and equipment


477


147Other


3,626


2,930Total noncurrent deferred tax assets


8,893


12,343Noncurrent deferred tax liabilities:Property, plant, and equipment


(12,178
)

(12,954
)Intangibles


(2,240
)

(4,488
)Employee benefits





(2,200
)Other


(903
)

(1,315
)Total noncurrent deferred tax liabilities


(15,321
)

(20,957
)Net noncurrent deferred tax liabilities

$
(6,428
)
$
(8,614
)


At
September 30, 2002, net noncurrent deferred tax assets of $12,343 are included in Deferred charges and other in the Consolidated Balance Sheets. At
September 30, 2001, net noncurrent deferred tax assets of $1,505 are included in Deferred charges and other and net current deferred tax liabilities of $1 are included in Other accrued
liabilities in the Consolidated Balance Sheets.

The
Company believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

Provision
has not been made for United States income taxes on a portion of the undistributed earnings of the Company's foreign subsidiaries (approximately $33,366 and $30,881 at
September 30, 2001 and 2002, respectively), either because any taxes on dividends would be offset substantially by foreign tax credits or because the Company intends to reinvest those earnings.
Such earnings would become taxable upon the sale or liquidation of these foreign subsidiaries or upon remittance of dividends. It is not practicable to estimate the amount of the deferred tax
liability on such earnings.

F-26

---



(10) Leases

Future minimum rental commitments under non-cancelable operating leases, principally pertaining to land, buildings and equipment, are as follows:

2003

$
6,2712004


5,0142005


4,7942006


3,9592007


3,633Thereafter


14,248$
37,919


The
leases on the properties require annual lease payments of $2,788 subject to annual inflationary increases. All of the leases expire during the years 2003 through
2014.

Total
rental expenses were $6,924, $7,137 and $7,341 for 2000, 2001 and 2002, respectively.

During
2002, the Company entered into a long-term lease for a facility being built in Dixon, Illinois (see Subsequent Events footnote 18). The Company anticipates that
construction will be completed and the lease payments will be fixed for this facility during the second fiscal quarter of 2003. As amounts are not fixed, minimum rental commitments for this lease are
not included above.

(11) Employee Benefit Plans

Pension Benefits

The Company has various defined benefit pension plans covering substantially all of its domestic hourly employees and union members. Plans generally provide
benefits of stated amounts for each year of service. The Company's practice is to fund pension costs at amounts within the acceptable ranges established by the Employee Retirement Income Security Act
of 1974, as amended.

The
Company also has various nonqualified deferred compensation agreements with certain of its employees. Under certain agreements, the Company has agreed to pay certain amounts annually
for the first 15 years subsequent to retirement or to a designated beneficiary upon death. It is management's intent that life insurance contracts owned by the Company will fund these
agreements. Under the other agreements, the Company has agreed to pay such deferral amounts in up to 15 annual installments beginning on a date specified by the employee, subsequent to retirement or
disability, or to a designated beneficiary upon death. The Company established a rabbi trust to fund these agreements.

Other Benefits

The Company provides certain health care and life insurance benefits to eligible retired employees. Participants earn retiree health care benefits after reaching
age 45 over the next 10 succeeding years of service and remain eligible until reaching age 65. The plan is contributory; retiree contributions have been established as a flat dollar amount with
contribution rates expected to increase at the active

F-27

---

medical trend rate. The plan is unfunded. The Company is amortizing the transition obligation over a 20-year period.

|                              |                                                | Pension Benefits |        | Other Benefits |  
|----------------------------- | ---------------------------------------------- | ---------------- | ------ | -------------- | -
|
|Change in benefit obligation  |                                                |                  |        |                |  
|                              | Benefit obligation at beginning of year        |                  | $      | 17,731         |  
|                              | Service cost                                   |                  |        | 616            |  
|                              | Interest cost                                  |                  |        | 1,415          |  
|                              | Amendments                                     |                  |        | 371            |  
|                              | Actuarial loss (gain)                          |                  |        | 1,180          |  
|                              | Benefits paid                                  |                  |        | (694           | )
|                              |                                                |                  |        |                |  
|                              | Benefit obligation at end of year              |                  | $      | 20,619         |  
|                              |                                                |                  |        |                |  
|Change in plan assets         |                                                |                  |        |                |  
|                              | Fair value of plan assets at beginning of year |                  | $      | 11,258         |  
|                              | Actual return on plan assets                   |                  |        | (1,252         | )
|                              | Employer contribution                          |                  |        | 3,114          |  
|                              | Benefits paid                                  |                  |        | (694           | )
|                              | Plan expenses paid                             |                  |        | (110           | )
|                              |                                                |                  |        |                |  
|                              | Fair value of plan assets at end of year       |                  | $      | 12,316         |  
|                              |                                                |                  |        |                |  
|Funded status                 |                                                | $                | (8,303 | )              | $
|                              | Unrecognized net transition obligation         |                  |        | 213            |  
|                              | Unrecognized prior service cost                |                  |        | 2,917          |  
|                              | Unrecognized net actuarial loss (gain)         |                  |        | 3,297          |  
|                              | Adjustment for minimum liability               |                  |        | (6,431         | )
|                              |                                                |                  |        |                |  
|                              | Accrued benefit cost                           |                  | $      | (8,307         | )
|                              |                                                |                  |        |                |  
|Weighted-average assumptions: |                                                |                  |        |                |  
|                              | Discount rate                                  |                  |        | 7.5            | %
|                              | Expected return on plan assets                 |                  |        | 8.5            | %

|                                        |                                      | Pension Benefits |   | Other Benefits
|--------------------------------------- | ------------------------------------ | ---------------- | - | --------------
|
|Components of net periodic benefit cost |                                      |                  |   |               
|                                        | Service cost                         |                  | $ | 506           
|                                        | Interest cost                        |                  |   | 1,239         
|                                        | Actual return on assets              |                  |   | (604          
|                                        | Amortization of prior service cost   |                  |   | 234           
|                                        | Recognized net actuarial (gain) loss |                  |   | (272          
|                                        |                                      |                  |   |               
|                                        | Net periodic benefit cost            |                  | $ | 1,103         
|                                        |                                      |                  |   |               

Pension
plan assets and obligations are measured at June 30 each year. The contributions to the pension plans between July 1 and September 30 were
$495 and $2,814 in 2001 and 2002, respectively.

The
Company has recorded an additional minimum pension liability of $6,431 and $10,435 at September 30, 2001 and 2002, respectively, to recognize the under funded position of its
benefit plans.

F-28

---

An intangible asset of $3,081 and $3,446 at September 30, 2001 and 2002, respectively, equal to the unrecognized prior service cost of these plans, has also been recorded. The excess of the
additional minimum liability over the unrecognized prior service cost of $3,350 and $6,989 at September 30, 2001 and 2002, respectively, has been recorded as a component of accumulated other
comprehensive income, net of tax.

The
Company sponsors a defined contribution pension plan for its domestic salaried employees, which allows participants to make contributions by salary reduction pursuant to
Section 401(k) of the Internal Revenue Code. The Company contributes annually from 3% to 6% of participants' compensation based on age, and may make additional discretionary contributions. The
Company also sponsors defined contribution pension plans for employees of certain foreign subsidiaries. Company contributions charged to operations, including discretionary amounts, for 2000, 2001 and
2002 were $2,171, $2,147, and $1,804, respectively.

For
measurement purposes, annual rates of increase of 8.0% in the per capita costs of covered health care benefits were assumed for 2000, 2001 and 2002, respectively, gradually
decreasing to 5.5%. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit obligation as of September 30, 2002 by $181 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year ended September 30, 2002 by $51. Decreasing the assumed health care cost trend rates by one percentage point in each year would decrease the
accumulated postretirement benefit obligation as of September 30, 2002 by $166 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the
year ended September 30, 2002 by $46.

(12) Segment Information

The Company manages operations in three reportable segments based upon geographic area. North America includes the United States and Canada; Latin America
includes Mexico, Central America, South America, and the Caribbean; Europe/Rest of World ("Europe/ROW") includes the United Kingdom, continental Europe and all other countries in which the Company
does business.

The
Company manufactures and markets dry cell batteries including alkaline, zinc carbon, alkaline rechargeable, hearing aid, and other specialty batteries and lighting products
throughout the world. These product lines are sold in all geographic areas. Latin America revenues have historically been derived primarily from zinc carbon and alkaline batteries.

Net
sales and cost of sales to other segments have been eliminated. The gross contribution of inter segment sales is included in the segment selling the product to the external customer.
Segment revenues are based upon the geographic area in which the product is sold.

The
reportable segment profits do not include interest expense, interest income, and income tax expense. Also, not included in the reportable segments are corporate expenses including
corporate purchasing expense, general and administrative expense and research and development expense. All depreciation and amortization included in income from operations is related to reportable
segments. Costs are identified to reportable segments or corporate, according to the function of each cost center.

F-29

---

The
reportable segment assets do not include cash, deferred tax benefits, investments, long-term intercompany receivables, most deferred charges, and miscellaneous assets.
All capital expenditures are related to reportable segments. Variable allocations of assets are not made for segment reporting.

Wal-Mart
Stores, Inc., the Company's largest mass merchandiser customer, represented 22%, 27% and 26% of its net sales during 2000, 2001 and 2002, respectively,
primarily in North America.

Revenues from external customers

2000

2001

2002North America

$
468,150

$
448,788

$
435,600Latin America


112,150


118,665


84,677Europe/ROW


50,614


48,719


52,459Total segments

$
630,914

$
616,172

$
572,736


Inter segment revenues

2000

2001

2002North America

$
23,563

$
30,634

$
34,069Latin America


1,293


9,518


5,556Europe/ROW


1,058


2,593


2,504Total segments

$
25,914

$
42,745

$
42,129


Depreciation and amortization

2000

2001

2002North America

$
13,266

$
14,253

$
15,401Latin America


5,253


5,393


2,879Europe/ROW


1,504


1,573


715Total segments

$
20,023

$
21,219

$
18,995


Segment profit

2000

2001

2002North America

$
95,351

$
80,774

$
85,490Latin America


20,273


16,913


5,330Europe/ROW


6,085


4,061


5,087Total segments


121,709


101,748


95,907Corporate expenses


32,378


25,072


31,676Special charges





22,307


1,210Interest expense


30,626


27,189


16,048Other expense, net


753


1,094


1,290Income before income taxes and extraordinary items

$
57,952

$
26,086

$
45,683


F-30

---

Segment assets

September 30,2000

2001

2002North America

$
274,798

$
289,215

$
256,446Latin America


199,865


205,918


191,002Europe/ROW


31,233


30,010


31,356Total segments


505,896


525,143


478,804Corporate


43,708


41,356


54,429Total assets at year end

$
549,604

$
566,499

$
533,233


Expenditures for segment assets

2000

2001

2002North America

$
14,668

$
17,521

$
13,158Latin America


3,448


1,761


1,514Europe/ROW


880


411


969Total segments

$
18,996

$
19,693

$
15,641


Product Line Revenues

2000

2001

2002Alkaline

$
280,700

$
302,900

$
295,700Heavy Duty


142,300


139,100


96,500Rechargeables


29,700


29,800


31,800Hearing Aid batteries


60,800


65,300


67,600Specialty batteries


41,400


17,800


15,300Lighting products and Lantern batteries


76,000


61,300


65,800Total revenues from external customers

$
630,900

$
616,200

$
572,700


(13) Commitments and Contingencies

In March 1998, the Company entered into an agreement to purchase certain equipment and to pay annual royalties. In connection with this 1998 agreement, the
Company committed to pay royalties of $2,000 in 1999, $3,000 in 2000 through 2002, and $500 in each year thereafter, as long as the related equipment patents are enforceable (until 2022). The Company
incurred royalty expenses of $2,250 for 2000, $3,000 for 2001, and $3,000 for 2002.

The
Company has provided for the estimated costs associated with environmental remediation activities at some of its current and former manufacturing sites. In addition, the Company,
together with other parties, has been designated a potentially responsible party of various third-party sites on the United States EPA National Priorities List (Superfund). The Company provides for
the estimated costs of investigation and remediation of these sites when such losses are probable and the amounts can be reasonably estimated. The actual cost incurred may vary from these estimates
due to the inherent uncertainties involved. The Company believes that any additional liability in excess of the amounts provided of $1,640, which may result from resolution of these matters, will not
have a material adverse effect on the financial condition, liquidity, or cash flow of the Company.

F-31

---

The
Company has certain other contingent liabilities with respect to litigation, claims and contractual agreements arising in the ordinary course of business. Such litigation includes
the suit filed against the Company by Eveready Battery Company and shareholder lawsuits. In the opinion of management, such contingent liabilities are not likely to have a material adverse effect on
the financial condition, liquidity or cash flow of the Company.

(14) Related Party Transactions

The Company and Thomas H. Lee Company (THL Co.) were parties to a Management Agreement pursuant to which the Company engaged THL Co. to provide consulting and
management advisory services for an initial period of five years through September 2001. The agreement was renewed for another year through 2002. The agreement was not renewed upon expiration
in September 2002. The Company paid THL Co. aggregate fees and expenses of $458, $473 and $364 for 2000, 2001 and 2002, respectively.

The
Company has notes receivable from officers/shareholders in the amount of $3,665 and $4,205 at September 30, 2001 and 2002, respectively, generally payable in fiscal 2003
through fiscal 2005, which bear interest at 4.6% to 8.0%. Since the officers utilized the proceeds of the notes to purchase common stock of the Company, directly or through the exercise of stock
options, the notes have been recorded as a reduction of shareholders' equity.

(15) Special Charges

During 1999, the Company recorded special charges as follows: (i) $2,528 of employee termination benefits for 43 employees related to organizational
restructuring in the U.S. and Europe, (ii) $1,300 of charges related to the discontinuation of the manufacturing of silver-oxide cells at the Company's Portage, Wisconsin, facility, and
(iii) $2,100 of charges related to the termination of non-performing foreign distributors. The Company also recognized special charges of $803 related to the investigation of financing options
and developing organizational strategies for the Latin American acquisition. A summary of the 1999 restructuring activities follows:

1999 Restructuring Summary

Termination
Benefits

Other
Costs

TotalExpense accrued

$
2,500

$
3,400

$
5,900Cash expenditures


(200
)




(200
)Balance September 30, 1999

$
2,300

$
3,400

$
5,700Change in estimate





100


100Cash expenditures


(2,200
)




(2,200
)Non cash charges





(3,300
)

(3,300
)Balance September 30, 2000

$
100

$
200

$
300Cash expenditures


(100
)




(100
)Non cash charges





(200
)

(200
)Balance September 30, 2001

$


$


$



F-32

---

During
2001, the Company recorded special charges related to: (i) an organizational restructuring in the U.S., (ii) manufacturing and distribution cost rationalization
initiatives in the Company's Tegucigalpa, Honduras and Mexico City, Mexico manufacturing facilities and in our European operations, (iii) the closure of the Company's Wonewoc, Wisconsin,
manufacturing facility, (iv) the rationalization of uneconomic manufacturing processes at the Company's Fennimore, Wisconsin, manufacturing facility, and rationalization of packaging operations
and product lines, and (v) costs associated with our June 2001 secondary offering. The amount recorded includes $9,100 of employee termination benefits for approximately 570 employees,
$9,900 of equipment, inventory, and other asset write-offs, and $2,000 of other expenses. A summary of the 2001 restructuring activities follows:

2001 Restructuring Summary

Termination
Benefits

Other
Costs

TotalExpense accrued

$
5,000

$
11,000

$
16,000Change in estimate


4,400


100


4,500Expense as incurred


700


1,100


1,800Cash expenditures


(5,800
)

(1,300
)

(7,100
)Non cash charges





(9,300
)

(9,300
)Balance September 30, 2001

$
4,300

$
1,600

$
5,900Change in estimate


(1,000
)

(300
)

(1,300
)Cash expenditures


(3,100
)




(3,100
)Non cash charges





(700
)

(700
)Balance September 30, 2002

$
200

$
600

$
800


During
2002, the Company announced a restructuring initiative in Latin America including: (i) the closure of the Company's Santo Domingo, Dominican Republic
manufacturing operations, and (ii) outsourcing a portion of its heavy duty battery production, previously manufactured at its Mexico City, Mexico location. The amount recorded includes $1,200
of employee termination benefits for approximately 115 employees, $900 of equipment, inventory, and other asset write-offs, and $300 of other expenses. A summary of the 2002 restructuring
activities follows:

2002 Restructuring Summary

Termination
Benefits

Other
Costs

TotalExpense accrued

$
1,200

$
1,400

$
2,600Change in estimate





(400
)

(400
)Expense as incurred





200


200Cash expenditures


(1,100
)

(200
)

(1,300
)Non cash charges





(1,000
)

(1,000
)Balance September 30, 2002

$
100

$


$
100


(16) Acquisitions and Divestitures

In 2000, the Company entered into an asset purchase agreement and a license agreement with a Hong Kong company to sell certain inventory and for the exclusive
right to use the Rayovac trade

F-33

---

name for the manufacture, sale and distribution of the Company's camcorder battery product line. In exchange for the license, the Company received a $6,000 promissory note, payable over five years,
and will receive a royalty on future sales of camcorder batteries. The Company will receive a minimum royalty of $100 over the balance of the license arrangement and will receive a variable royalty on
sales of camcorder batteries. The Company has no substantive future obligation relative to this agreement. As a result of this transaction, the Company recognized a pretax gain on the sale of the
trade name licensing rights of $1,997, net of write-off of related tangible and intangible assets.

In
2002, the Company entered into similar agreements with the same Hong Kong company for the cordless product line and licensing agreements on other product lines not currently sold by
the Company. The Company received promissory notes in the amount of $800 payable over terms of up to five years. The Company will receive variable royalties on sales of product lines licensed. As a
result of these transactions, the Company recognized a pretax gain of $701.

(17) Quarterly Results (unaudited)

|                                    |  | Quarter Ended
|----------------------------------- |  | -------------
|
|Net sales                           |  | $            
|Gross profit                        |  |              
|Net income                          |  |              
|Basic net income per common share   |  |              
|Diluted net income per common share |  |              

|                                           |  | Quarter Ended
|------------------------------------------ |  | -------------
|
|Net sales                                  |  | $            
|Gross profit                               |  |              
|(Loss) income before extraordinary item    |  |              
|Net (loss) income                          |  |              
|Basic net (loss) income per common share   |  |              
|Diluted net (loss) income per common share |  |              

(18) Subsequent Events

On October 1, 2002, the Company acquired the consumer battery business of VARTA AG (VARTA) for approximately 262 million Euros. The
transaction did not include VARTA's Brazilian joint venture, its automotive or micro-power business. The Company acquired all of the VARTA consumer subsidiaries located outside of Germany and became
the majority owner of a new joint venture entity that will conduct all consumer battery business within Germany. The Company has not yet finalized the purchase price allocation for the acquisition.
(See also footnote 6.)

On
October 10, 2002, the Company committed to and announced a series of initiatives to position the Company for future growth opportunities and to optimize the global resources of
the combined VARTA and Rayovac companies. The Company expects to take a restructuring charge of approximately $20 million pretax to be recorded in the first quarter of fiscal 2003 and an
additional $10-$15 million to be recorded as incurred. Cash cost of the restructuring program is expected to total $15-$20 million.

F-34

---

Cost savings related to these initiatives are projected to be in the range of $35-$40 million when fully realized in fiscal 2005. Initiatives include: closure of the Mexico City,
Mexico zinc carbon manufacturing plant; closure of operations at its Middleton, Wisconsin distribution center and its Madison, Wisconsin packaging center and combination of the two operations into a
new leased complex being built in Dixon, Illinois. Transition to the new facility is expected by June 2003. In addition to the manufacturing, packaging, and distribution changes, the Company
anticipates a series of sales, marketing, operations and administrative restructuring initiatives on all three continents. These changes are the result of duplication synergies between the Rayovac and
VARTA organizations and on-going cost containment initiatives. The combination of all these restructuring initiatives is expected to ultimately reduce the workforce by approximately 630 or
14 percent of the current worldwide workforce.

(19) Condensed Consolidating Financial Statements

The following condensed consolidating financial data illustrates the composition of the consolidated financial statements. Investments in subsidiaries are
accounted for using the equity method for purposes of the consolidating presentation. Earnings of subsidiaries are therefore reflected in the Company's and Guarantor Subsidiaries' investment accounts
and earnings. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Separate
financial statements of the Guarantor Subsidiaries are not presented because management has determined that such financial statements would not be material to investors.

F-35

---



(19) Condensed Consolidating Financial Statements (Continued)

Condensed Consolidating Balance Sheet
September 30, 2002

|                                                     |                                             | Parent                                                             |         | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |         | Eliminations |        | Consolidated
Total |        
|---------------------------------------------------- | ------------------------------------------- | ------------------------------------------------------------------ | ------- | ---------------------- | ------- | ------------------------- | ------- | ------------ | ------ | ------------------ | -------
|ASSETS                                               |                                            
|Current assets:                                      |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     | Cash and cash equivalents                   |                                                                    | $       | 3,518                  |         | $                         | 46      |              | $      | 6,317              |        
|                                                     | Receivables:                                |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     |                                             | Trade accounts receivables, net of allowance for doubtful accounts |         |                        | 27,246  |                           |         | 51,117       |        |                    | 50,564 
|                                                     |                                             | Other                                                              |         |                        | 17,418  |                           |         | 10,762       |        |                    | 7,107  
|                                                     | Inventories                                 |                                                                    |         | 58,619                 |         |                           |        |              |        | 28,142             |        
|                                                     | Deferred income taxes                       |                                                                    |         | 5,607                  |         |                           |        |              |        | 2,979              |        
|                                                     | Prepaid expenses and other                  |                                                                    |         | 14,452                 |         |                           |        |              |        | 5,518              |        
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     | Total current assets                        |                                                                    |         | 126,860                |         |                           | 61,925  |              |        | 100,627            |        
|Property, plant and equipment, net                   |                                             |                                                                    | 75,838  |                        |         |                          |         |              | 26,748 |                    |        
|Deferred charges and other                           |                                             |                                                                    | 71,492  |                        |         | 1,599                     |         |              | 5,890  |                    |        
|Intangible assets, net                               |                                             |                                                                    | 90,081  |                        |         |                          |         |              | 29,532 |                    |        
|Debt issuance costs                                  |                                             |                                                                    | 3,207   |                        |         |                          |         |              |       |                    |        
|Investments in subsidiaries                          |                                             |                                                                    | 149,329 |                        |         | 86,673                    |         |              |       |                    |        
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     |                                             | Total assets                                                       |         | $                      | 516,807 |                           | $       | 150,197      |        | $                  | 162,797
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|LIABILITIES AND SHAREHOLDERS' EQUITY                 |                                            
|Current liabilities:                                 |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     | Current maturities of long-term debt        |                                                                    | $       | 16,985                 |         | $                         |        |              | $      | 3,854              |        
|                                                     | Accounts payable                            |                                                                    |         | 68,188                 |         |                           |        |              |        | 27,688             |        
|                                                     | Accrued liabilities:                        |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     |                                             | Wages and benefits                                                 |         |                        | 7,182   |                           |         |             |        |                    | 1,728  
|                                                     |                                             | Accrued interest                                                   |         |                        | 1,657   |                           |         |             |        |                    | 7      
|                                                     |                                             | Other special charges                                              |         |                        | 1,639   |                           |         |             |        |                    | 62     
|                                                     |                                             | Other                                                              |         |                        | 12,027  |                           |         | 863          |        |                    | 4,064  
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     |                                             | Total current liabilities                                          |         |                        | 107,678 |                           |         | 863          |        |                    | 37,403 
|Long-term debt, net of current maturities            |                                             |                                                                    | 188,461 |                        |         |                          |         |              | 30,298 |                    |        
|Employee benefit obligations, net of current portion |                                             |                                                                    | 23,603  |                        |         |                          |         |              | 406    |                    |        
|Deferred income taxes                                |                                             |                                                                    | 13,549  |                        |         | 5                         |         |              | 7,403  |                    |        
|Other                                                |                                             |                                                                    | 5,354   |                        |         |                          |         |              | 865    |                    |        
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     |                                             | Total liabilities                                                  |         |                        | 338,645 |                           |         | 868          |        |                    | 76,375 
|Shareholders' equity:                                |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     | Common stock                                |                                                                    |         | 615                    |         |                           | 1       |              |        | 12,072             |        
|                                                     | Additional paid-in capital                  |                                                                    |         | 180,704                |         |                           | 62,788  |              |        | 54,157             |        
|                                                     | Retained earnings                           |                                                                    |         | 152,745                |         |                           | 95,099  |              |        | 28,449             |        
|                                                     | Accumulated other comprehensive loss        |                                                                    |         | (19,894                | )       |                           | (8,559  | )            |        | (8,256             | )      
|                                                     | Notes receivable from officers/shareholders |                                                                    |         | (4,205                 | )       |                           |        |              |        |                   |        
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     |                                             |                                                                    | 309,965 |                        |         | 149,329                   |         |              | 86,422 |                    |        
|                                                     | Less treasury stock, at cost                |                                                                    |         | (130,070               | )       |                           |        |              |        |                   |        
|                                                     | Less unearned restricted stock compensation |                                                                    |         | (1,733                 | )       |                           |        |              |        |                   |        
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     | Total shareholders' equity                  |                                                                    |         | 178,162                |         |                           | 149,329 |              |        | 86,422             |        
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        
|                                                     | Total liabilities and shareholders' equity  |                                                                    | $       | 516,807                |         | $                         | 150,197 |              | $      | 162,797            |        
|                                                     |                                             |                                                                    |         |                        |         |                           |         |              |        |                    |        

F-36

---

Condensed Consolidating Statement of Operations
Year Ended September 30, 2002

|                                  |                            | Parent |         | Guarantor
Subsidiaries |   | Nonguarantor
Subsidiaries |         | Eliminations |         | Consolidated
Total
|--------------------------------- | -------------------------- | ------ | ------- | ---------------------- | - | ------------------------- | ------- | ------------ | ------- | ------------------
|Net sales                         |                            | $      | 424,199 |                        | $ | 42,132                    |         | $            | 160,926 |                   
|Cost of goods sold                |                            |        | 237,431 |                        |   | 40,869                    |         |              | 108,742 |                   
|Special charges                   |                            |        | (1,063  | )                      |   |                          |         |              | 2,273   |                   
|                                  |                            |        |         |                        |   |                           |         |              |         |                   
|                                  | Gross profit               |        |         | 187,831                |   |                           | 1,263   |              |         | 49,911            
|Operating expenses:               |                            |        |         |                        |   |                           |         |              |         |                   
|                                  | Selling                    |        |         | 71,389                 |   |                           | 818     |              |         | 32,557            
|                                  | General and administrative |        |         | 53,543                 |   |                           | (11,328 | )            |         | 14,685            
|                                  | Research and development   |        |         | 13,084                 |   |                           |        |              |         |                  
|                                  |                            |        |         |                        |   |                           |         |              |         |                   
|                                  |                            |        | 138,016 |                        |   | (10,510                   | )       |              | 47,242  |                   
|                                  |                            |        |         |                        |   |                           |         |              |         |                   
|Income from operations            |                            |        | 49,815  |                        |   | 11,773                    |         |              | 2,669   |                   
|Interest expense                  |                            |        | 15,390  |                        |   |                          |         |              | 2,216   |                   
|Equity (income) loss              |                            |        | (10,697 | )                      |   | 2,389                     |         |              |        |                   
|Other (income) expense, net       |                            |        | (2,180  | )                      |   | (469                      | )       |              | 2,131   |                   
|                                  |                            |        |         |                        |   |                           |         |              |         |                   
|Income (loss) before income taxes |                            |        | 47,302  |                        |   | 9,853                     |         |              | (1,678  | )                 
|Income tax expense (benefit)      |                            |        | 16,579  |                        |   | (844                      | )       |              | 711     |                   
|                                  |                            |        |         |                        |   |                           |         |              |         |                   
|                                  | Net income (loss)          |        | $       | 30,723                 |   | $                         | 10,697  |              | $       | (2,389            
|                                  |                            |        |         |                        |   |                           |         |              |         |                   

F-37

---

Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2002

|                                                             |                                                      | Parent |         | Guarantor
Subsidiaries |   | Nonguarantor
Subsidiaries |   | Eliminations |        | Consolidated
Total |  
|------------------------------------------------------------ | ---------------------------------------------------- | ------ | ------- | ---------------------- | - | ------------------------- | - | ------------ | ------ | ------------------ | -
|Net cash provided by operating activities                    |                                                      | $      | 65,250  |                        | $ |                          |   | $            | 6,615  |                    | $
|Cash flows from investing activities:                        |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|                                                             | Purchases of property, plant and equipment           |        |         | (13,154                | ) |                           |  |              |        | (2,487             | )
|                                                             | Proceeds from sale of property, plant, and equipment |        |         | 42                     |   |                           |  |              |        | 126                |  
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Net cash used by investing activities                        |                                                      |        | (13,112 | )                      |   |                          |   |              | (2,361 | )                  |  
|Cash flows from financing activities:                        |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|                                                             | Reduction of debt                                    |        |         | (219,343               | ) |                           |  |              |        | (5,088             | )
|                                                             | Proceeds from debt financing                         |        |         | 169,100                |   |                           |  |              |        |                   |  
|                                                             | Issuance of stock and exercise of stock options      |        |         | 134                    |   |                           |  |              |        |                   |  
|                                                             | Other                                                |        |         | (1,360                 | ) |                           |  |              |        | (408               | )
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Net cash used by financing activities                        |                                                      |        | (51,469 | )                      |   |                          |   |              | (5,496 | )                  |  
|Effect of exchange rate changes on cash and cash equivalents |                                                      |        |        |                        |   |                          |   |              | (904   | )                  |  
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Net increase (decrease) in cash and cash equivalents         |                                                      |        | 669     |                        |   |                          |   |              | (2,146 | )                  |  
|Cash and cash equivalents, beginning of period               |                                                      |        | 2,849   |                        |   | 46                        |   |              | 8,463  |                    |  
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Cash and cash equivalents, end of period                     |                                                      | $      | 3,518   |                        | $ | 46                        |   | $            | 6,317  |                    | $
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  

F-38

---

Condensed Consolidating Balance Sheet
September 30, 2001

|                                                     |                                                           | Parent                    |         | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |         | Eliminations |        | Consolidated
Total |       
|---------------------------------------------------- | --------------------------------------------------------- | ------------------------- | ------- | ---------------------- | ------- | ------------------------- | ------- | ------------ | ------ | ------------------ | ------
|ASSETS                                               |                                                          
|Current assets:                                      |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Cash and cash equivalents                                 |                           | $       | 2,849                  |         | $                         | 46      |              | $      | 8,463              |       
|                                                     | Receivables:                                              |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Trade receivables, net of allowance for doubtful accounts |                           |         | 56,053                 |         |                           | 40,150  |              |        | 64,740             |       
|                                                     | Other                                                     |                           |         | 17,965                 |         |                           | 7,637   |              |        | 2,579              |       
|                                                     | Inventories                                               |                           |         | 68,094                 |         |                           |        |              |        | 24,619             |       
|                                                     | Deferred income taxes                                     |                           |         | 7,748                  |         |                           | 342     |              |        | 1,741              |       
|                                                     | Prepaid expenses and other                                |                           |         | 14,177                 |         |                           |        |              |        | 7,666              |       
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Total current assets                                      |                           |         | 166,886                |         |                           | 48,175  |              |        | 109,808            |       
|Property, plant and equipment, net                   |                                                           |                           | 78,436  |                        |         | 33                        |         |              | 28,788 |                    |       
|Deferred charges and other                           |                                                           |                           | 49,575  |                        |         | 631                       |         |              | 2,717  |                    |       
|Intangible assets, net                               |                                                           |                           | 89,889  |                        |         |                          |         |              | 29,373 |                    |       
|Debt issuance costs                                  |                                                           |                           | 4,463   |                        |         |                          |         |              |       |                    |       
|Investments in subsidiaries                          |                                                           |                           | 145,872 |                        |         | 97,299                    |         |              |       |                    |       
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Total assets                                              |                           | $       | 535,121                |         | $                         | 146,138 |              | $      | 170,686            |       
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|LIABILITIES AND SHAREHOLDERS' EQUITY                 |                                                          
|Current liabilities:                                 |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Current maturities of long-term debt                      |                           | $       | 22,412                 |         | $                         |        |              | $      | 9,223              |       
|                                                     | Accounts payable                                          |                           |         | 71,397                 |         |                           | 26      |              |        | 25,130             |       
|                                                     | Accrued liabilities:                                      |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     |                                                           | Wages and benefits        |         |                        | 4,812   |                           |         |             |        |                    | 2,366 
|                                                     |                                                           | Accrued interest          |         |                        | 1,801   |                           |         |             |        |                    | 129   
|                                                     |                                                           | Other special charges     |         |                        | 4,938   |                           |         |             |        |                    | 945   
|                                                     |                                                           | Other                     |         |                        | 13,413  |                           |         |             |        |                    | 9,711 
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     |                                                           | Total current liabilities |         |                        | 118,773 |                           |         | 26           |        |                    | 47,504
|Long-term debt, net of current maturities            |                                                           |                           | 234,271 |                        |         |                          |         |              | 17,900 |                    |       
|Employee benefit obligations, net of current portion |                                                           |                           | 19,086  |                        |         |                          |         |              | 562    |                    |       
|Deferred income taxes                                |                                                           |                           | 1,694   |                        |         | 240                       |         |              | 5,494  |                    |       
|Other                                                |                                                           |                           | 1,829   |                        |         |                          |         |              | 1,927  |                    |       
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Total liabilities                                         |                           |         | 375,653                |         |                           | 266     |              |        | 73,387             |       
|Shareholders' equity:                                |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Common stock                                              |                           |         | 615                    |         |                           | 1       |              |        | 12,072             |       
|                                                     | Additional paid-in capital                                |                           |         | 180,634                |         |                           | 62,788  |              |        | 54,904             |       
|                                                     | Retained earnings                                         |                           |         | 122,022                |         |                           | 84,151  |              |        | 31,089             |       
|                                                     | Accumulated other comprehensive loss                      |                           |         | (6,904                 | )       |                           | (1,068  | )            |        | (766               | )     
|                                                     | Notes receivable from officers/shareholders               |                           |         | (3,665                 | )       |                           |        |              |        |                   |       
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     |                                                           |                           | 292,702 |                        |         | 145,872                   |         |              | 97,299 |                    |       
|                                                     | Less treasury stock, at cost                              |                           |         | (130,070               | )       |                           |        |              |        |                   |       
|                                                     | Less unearned restricted stock compensation               |                           |         | (3,164                 | )       |                           |        |              |        |                   |       
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Total shareholders' equity                                |                           |         | 159,468                |         |                           | 145,872 |              |        | 97,299             |       
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       
|                                                     | Total liabilities and shareholders' equity                |                           | $       | 535,121                |         | $                         | 146,138 |              | $      | 170,686            |       
|                                                     |                                                           |                           |         |                        |         |                           |         |              |        |                    |       

F-39

---

Condensed Consolidating Statement of Operations
Year Ended September 30, 2001

|                                                                                              |                              | Parent |         | Guarantor
Subsidiaries |   | Nonguarantor
Subsidiaries |         | Eliminations |         | Consolidated
Total |  
|--------------------------------------------------------------------------------------------- | ---------------------------- | ------ | ------- | ---------------------- | - | ------------------------- | ------- | ------------ | ------- | ------------------ | -
|Net sales                                                                                     |                              | $      | 431,602 |                        | $ | 45,223                    |         | $            | 194,157 |                    | $
|Cost of goods sold                                                                            |                              |        | 249,496 |                        |   | 43,866                    |         |              | 121,902 |                    |  
|Special charges                                                                               |                              |        | 17,399  |                        |   |                          |         |              | 4,704   |                    |  
|                                                                                              |                              |        |         |                        |   |                           |         |              |         |                    |  
|                                                                                              | Gross profit                 |        |         | 164,707                |   |                           | 1,357   |              |         | 67,551             |  
|Operating expenses:                                                                           |                              |        |         |                        |   |                           |         |              |         |                    |  
|                                                                                              | Selling                      |        |         | 82,340                 |   |                           | 681     |              |         | 36,585             |  
|                                                                                              | General and administrative   |        |         | 43,384                 |   |                           | (11,640 | )            |         | 14,782             |  
|                                                                                              | Research and development     |        |         | 12,191                 |   |                           |        |              |         |                   |  
|                                                                                              | Special charges              |        |         | 204                    |   |                           |        |              |         |                   |  
|                                                                                              |                              |        |         |                        |   |                           |         |              |         |                    |  
|                                                                                              |                              |        | 138,119 |                        |   | (10,959                   | )       |              | 51,367  |                    |  
|                                                                                              |                              |        |         |                        |   |                           |         |              |         |                    |  
|Income from operations                                                                        |                              |        | 26,588  |                        |   | 12,316                    |         |              | 16,184  |                    |  
|Interest expense                                                                              |                              |        | 25,860  |                        |   |                          |         |              | 3,033   |                    |  
|Equity (income)                                                                               |                              |        | (20,008 | )                      |   | (6,640                    | )       |              |        |                    |  
|Other (income) expense, net                                                                   |                              |        | (1,491  | )                      |   | (584                      | )       |              | 1,465   |                    |  
|                                                                                              |                              |        |         |                        |   |                           |         |              |         |                    |  
|Income before income taxes and extraordinary item                                             |                              |        | 22,227  |                        |   | 19,540                    |         |              | 11,686  |                    |  
|                                                                                              | Income tax expense (benefit) |        |         | 4,647                  |   |                           | (468    | )            |         | 5,046              |  
|                                                                                              |                              |        |         |                        |   |                           |         |              |         |                    |  
|Income before extraordinary item                                                              |                              |        | 17,580  |                        |   | 20,008                    |         |              | 6,640   |                    |  
|Extraordinary item, loss on early extinguishment of debt, net of income tax benefit of $3,260 |                              |        | (5,327  | )                      |   |                          |         |              |        |                    |  
|                                                                                              |                              |        |         |                        |   |                           |         |              |         |                    |  
|                                                                                              | Net income                   |        | $       | 12,253                 |   | $                         | 20,008  |              | $       | 6,640              |  
|                                                                                              |                              |        |         |                        |   |                           |         |              |         |                    |  

F-40

---

Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2001

|                                                             |                                                      | Parent |         | Guarantor
Subsidiaries |   | Nonguarantor
Subsidiaries |   | Eliminations |        | Consolidated
Total |  
|------------------------------------------------------------ | ---------------------------------------------------- | ------ | ------- | ---------------------- | - | ------------------------- | - | ------------ | ------ | ------------------ | -
|Net cash provided by operating activities                    |                                                      | $      | 12,293  |                        | $ | 2                         |   | $            | 5,752  |                    | $
|Cash flows from investing activities:                        |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|                                                             | Purchases of property, plant and equipment           |        |         | (17,475                | ) |                           |  |              |        | (2,218             | )
|                                                             | Purchases of investments                             |        |         | (500                   | ) |                           |  |              |        | (297               | )
|                                                             | Proceeds from sale of investments                    |        |         |                       |   |                           |  |              |        | 1,354              |  
|                                                             | Proceeds from sale of property, plant, and equipment |        |         | 78                     |   |                           |  |              |        | 785                |  
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Net cash used by investing activities                        |                                                      |        | (17,897 | )                      |   |                          |   |              | (376   | )                  |  
|Cash flows from financing activities:                        |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|                                                             | Reduction of debt                                    |        |         | (412,815               | ) |                           |  |              |        | (3,884             | )
|                                                             | Extinguishment of debt                               |        |         | (69,652                | ) |                           |  |              |        |                   |  
|                                                             | Proceeds from debt financing                         |        |         | 421,914                |   |                           |  |              |        |                   |  
|                                                             | Issuance of stock and exercise of stock options      |        |         | 67,506                 |   |                           |  |              |        |                   |  
|                                                             | Other                                                |        |         | (1,191                 | ) |                           |  |              |        | (209               | )
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Net cash provided (used) by financing activities             |                                                      |        | 5,762   |                        |   |                          |   |              | (4,093 | )                  |  
|Effect of exchange rate changes on cash and cash equivalents |                                                      |        |        |                        |   |                          |   |              | 158    |                    |  
|Net increase in cash and cash equivalents                    |                                                      |        | 158     |                        |   | 2                         |   |              | 1,441  |                    |  
|Cash and cash equivalents, beginning of period               |                                                      |        | 2,691   |                        |   | 44                        |   |              | 7,022  |                    |  
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Cash and cash equivalents, end of period                     |                                                      | $      | 2,849   |                        | $ | 46                        |   | $            | 8,463  |                    | $
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  

F-41

---

Condensed Consolidating Statement of Operations
Year Ended September 30, 2000

|                               |                            | Parent |         | Guarantor
Subsidiaries |   | Nonguarantor
Subsidiaries |         | Eliminations |         | Consolidated
Total
|------------------------------ | -------------------------- | ------ | ------- | ---------------------- | - | ------------------------- | ------- | ------------ | ------- | ------------------
|Net sales                      |                            | $      | 443,942 |                        | $ | 43,479                    |         | $            | 180,213 |                   
|Cost of goods sold             |                            |        | 259,438 |                        |   | 42,175                    |         |              | 106,349 |                   
|                               |                            |        |         |                        |   |                           |         |              |         |                   
|                               | Gross profit               |        |         | 184,504                |   |                           | 1,304   |              |         | 73,864            
|Operating expenses:            |                            |        |         |                        |   |                           |         |              |         |                   
|                               | Selling                    |        |         | 81,409                 |   |                           | 662     |              |         | 28,649            
|                               | General and administrative |        |         | 44,762                 |   |                           | (11,791 | )            |         | 16,753            
|                               | Research and development   |        |         | 10,646                 |   |                           |        |              |         | 117               
|                               | Special charges            |        |         | (250                   | ) |                           |        |              |         | 250               
|                               |                            |        |         |                        |   |                           |         |              |         |                   
|                               |                            |        | 136,567 |                        |   | (11,129                   | )       |              | 45,769  |                   
|                               |                            |        |         |                        |   |                           |         |              |         |                   
|Income from operations         |                            |        | 47,937  |                        |   | 12,433                    |         |              | 28,095  |                   
|Interest expense               |                            |        | 30,109  |                        |   |                          |         |              | 548     |                   
|Equity in profit of subsidiary |                            |        | (29,685 | )                      |   | (17,354                   | )       |              |        |                   
|Other (income) expense, net    |                            |        | (844    | )                      |   | (134                      | )       |              | 1,556   |                   
|                               |                            |        |         |                        |   |                           |         |              |         |                   
|Income before income taxes     |                            |        | 48,357  |                        |   | 29,921                    |         |              | 25,991  |                   
|Income tax expense             |                            |        | 10,729  |                        |   | 236                       |         |              | 8,637   |                   
|                               |                            |        |         |                        |   |                           |         |              |         |                   
|                               | Net income                 |        | $       | 37,628                 |   | $                         | 29,685  |              | $       | 17,354            
|                               |                            |        |         |                        |   |                           |         |              |         |                   

F-42

---

Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2000

|                                                             |                                                      | Parent |         | Guarantor
Subsidiaries |   | Nonguarantor
Subsidiaries |   | Eliminations |        | Consolidated
Total |  
|------------------------------------------------------------ | ---------------------------------------------------- | ------ | ------- | ---------------------- | - | ------------------------- | - | ------------ | ------ | ------------------ | -
|Net cash provided (used) by operating activities             |                                                      | $      | 36,240  |                        | $ | (3                        | ) | $            | 4,453  |                    | $
|Cash flows from investing activities:                        |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|                                                             | Purchases of property, plant and equipment           |        |         | (14,668                | ) |                           |  |              |        | (4,328             | )
|                                                             | Proceeds from sale of property, plant, and equipment |        |         | 1,051                  |   |                           |  |              |        |                   |  
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Net cash used by investing activities                        |                                                      |        | (13,617 | )                      |   |                          |   |              | (4,328 | )                  |  
|Cash flows from financing activities:                        |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|                                                             | Reduction of debt                                    |        |         | (199,970               | ) |                           |  |              |        | (15,424            | )
|                                                             | Proceeds from debt financing                         |        |         | 182,274                |   |                           |  |              |        | 12,966             |  
|                                                             | Other                                                |        |         | (3,607                 | ) |                           |  |              |        | (91                | )
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Net cash used by financing activities                        |                                                      |        | (21,303 | )                      |   |                          |   |              | (2,549 | )                  |  
|Effect of exchange rate changes on cash and cash equivalents |                                                      |        |        |                        |   |                          |   |              | (202   | )                  |  
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Net increase (decrease) in cash and cash equivalents         |                                                      |        | 1,320   |                        |   | (3                        | ) |              | (2,626 | )                  |  
|Cash and cash equivalents, beginning of year                 |                                                      |        | 1,371   |                        |   | 47                        |   |              | 9,648  |                    |  
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  
|Cash and cash equivalents, end of year                       |                                                      | $      | 2,691   |                        | $ | 44                        |   | $            | 7,022  |                    | $
|                                                             |                                                      |        |         |                        |   |                           |   |              |        |                    |  

F-43

---



Independent Auditors' Report

The
Board of Directors and Shareholders
Rayovac Corporation:

On
November 1, 2002, we reported on the consolidated balance sheets of Rayovac Corporation and subsidiaries as of September 30, 2001 and 2002, and the related consolidated
statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended September 30, 2002, which are included in
the 2002 Annual Report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule
as listed in Item 14(a)2. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on
our audits.

In
our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects,
the information set forth therein.



Milwaukee,
Wisconsin
November 1, 2002

II-1

---



RAYOVAC CORPORATION AND SUBSIDIARIES

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

For the years ended September 30, 2002, 2001 and 2000

(In thousands)

|Column A            |                                 | Column B |   | Column C |  | Column D |        | Column E
|------------------- | ------------------------------- | -------- | - | -------- |  | -------- | ------ | --------
|
|September 30, 2002: |                                 |          |   |          |  |          |        |         
|                    | Allowance for doubtful accounts |          | $ | 2,139    |  | $        | 14,869 |         
|September 30, 2001: |                                 |          |   |          |  |          |        |         
|                    | Allowance for doubtful accounts |          | $ | 1,020    |  | $        | 5,149  |         
|September 30, 2000: |                                 |          |   |          |  |          |        |         
|                    | Allowance for doubtful accounts |          | $ | 1,253    |  | $        | 583    |         

See
accompanying Independent Auditors' Report

II-2

---



Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

| |  |  |  | RAYOVAC CORPORATION                                             
| |  |  |  | ----------------------------------------------------------------
| |  |  |  | /s/DAVID A. JONES                                               
| |  |  |  | David A. Jones
Chairman of the Board
and Chief Executive Officer

DATE:
December 16, 2002

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
indicated and on the above-stated date.

|Signature                                     |  | Title                                                                                            
|--------------------------------------------- |  | -------------------------------------------------------------------------------------------------
|                                              |  |                                                                                                  
|/s/DAVID A. JONESDavid A. Jones               |  | Chairman of the Board and Chief Executive Officer (Principal Executive Officer)                  
|/s/RANDALL J. STEWARDRandall J. Steward       |  | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
|/s/KENT J. HUSSEYKent J. Hussey               |  | Chief Operating Officer and Director                                                             
|/s/WILLIAM P. CARMICHAELWilliam P. Carmichael |  | Director                                                                                         
|/s/JOHN S. LUPOJohn S. Lupo                   |  | Director                                                                                         
|/s/PHILIP F. PELLEGRINOPhilip F. Pellegrino   |  | Director                                                                                         
|/s/THOMAS R. SHEPHERDThomas R. Shepherd       |  | Director                                                                                         
|/s/BARBARA S. THOMASBarbara S. Thomas         |  | Director                                                                                         

II-3

---



CERTIFICATIONS

I,
David A. Jones, certify that:



|Date: December 16, 2002 |  |                                                        
|----------------------- |  | -------------------------------------------------------
|                        |  | /s/DAVID A. JONESDavid A. Jones
Chief Executive Officer

II-4

---

I,
Randall J. Steward, certify that:



|Date: December 16, 2002 |  |                                                                
|----------------------- |  | ---------------------------------------------------------------
|                        |  | /s/RANDALL J. STEWARDRandall J. Steward
Chief Financial Officer

II-5

---



Exhibit Index

|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                           
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1+++         |  | Joint Venture Agreement dated July 28, 2002, by and among the Company, VARTA and ROV German Limited GmbH, as amended.                                                                                                                                                                                                 
|3.1+           |  | Amended and Restated Articles of Incorporation of the Company.                                                                                                                                                                                                                                                        
|3.2            |  | Amended and Restated By-laws of the Company, as amended through July 24, 2002.                                                                                                                                                                                                                                        
|4.1*           |  | Specimen certificate representing the Common Stock.                                                                                                                                                                                                                                                                   
|10.1           |  | Amended and Restated Employment Agreement, dated as of October 1, 2002, by and between the Company and David A. Jones.                                                                                                                                                                                                
|10.2           |  | Amended and Restated Employment Agreement, dated as of October 1, 2002, by and between the Company and Kent J. Hussey.                                                                                                                                                                                                
|10.3           |  | Amended and Restated Employment Agreement, dated as of October 1, 2002, by and between the Company and Kenneth V. Biller.                                                                                                                                                                                             
|10.4           |  | Amended and Restated Employment Agreement, dated as of October 1, 2002, by and between the Company and Stephen P. Shanesy.                                                                                                                                                                                            
|10.5           |  | Amended and Restated Employment Agreement, dated as of October 1, 2002, by and between the Company and Merrell M. Tomlin.                                                                                                                                                                                             
|10.6           |  | Amended and Restated Employment Agreement, dated as of October 1, 2002, by and between the Company and Luis A. Cancio.                                                                                                                                                                                                
|10.7           |  | Amended and Restated Employment Agreement, dated as of October 1, 2002, by and between the Company and Dr. Paul G. Cheeseman.                                                                                                                                                                                         
|10.8           |  | Employment Agreement, dated as of August 19, 2002, by and between the Company and Randall J. Steward.                                                                                                                                                                                                                 
|10.9           |  | Registered Director's Agreement, effective as of October 1, 2002, by and between ROV German Holding GmbH and Remy Burel.                                                                                                                                                                                              
|10.10**        |  | Technology, License and Service Agreement between Battery Technologies (International) Limited and the Company, dated June 1, 1991, as amended April 19, 1993, and December 31, 1995.                                                                                                                                 
|10.11**        |  | Building Lease between the Company and SPG Partners dated May 14, 1985, as amended June 24, 1986, and June 10, 1987.                                                                                                                                                                                                  
|10.12****      |  | Amendment, dated December 31, 1998, between the Company and SPG Partners, to the Building Lease, between the Company and SPG Partners, dated May 14, 1985.                                                                                                                                                            
|10.13          |  | Build-To-Suit Lease Agreement, dated as of May 2, 2002, by and among 200 Corporate Drive, L.L.C., as Landlord, the Company, as Tenant, and Higgins Development Partners, L.L.C., as Developer.                                                                                                                        
|10.14+++       |  | Third Amended and Restated Credit Agreement, dated October 1, 2002, by and among the Company, VARTA Geratebatterie GmbH, the lenders party thereto, LaSalle Bank National Association, as documentation agent, Citicorp
North America, Inc., as syndication agent, and Bank of America, N.A., as administrative agent.
|10.15***       |  | Rayovac Corporation 1996 Stock Option Plan.                                                                                                                                                                                                                                                                           
|10.16*         |  | 1997 Rayovac Incentive Plan.                                                                                                                                                                                                                                                                                          
|10.17*         |  | Rayovac Profit Sharing and Savings Plan.                                                                                                                                                                                                                                                                              
|10.18++        |  | Technical Collaboration, Sale and Supply Agreement, dated as of March 5, 1998, by and among the Company. Matsushita Battery Industrial Co., Ltd. and Matsushita Electric Industrial Co., Ltd.                                                                                                                         
|21             |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                          
|23             |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                  
|99.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                    

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|99.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

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|*    |  | Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration No. 333-35181) filed with the Commission.                                   
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**   |  | Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration No. 333-17895) filed with the Commission.                                   
|***  |  | Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 29, 1997, filed with the Commission on August 13, 1997.    
|**** |  | Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended January 3, 1999, filed with the Commission on February 17, 1999.
|+    |  | Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997, filed with the Commission on December 23, 1997.     
|++   |  | Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 28, 1998, filed with the Commission on May 5, 1998.       
|+++  |  | Incorporated by reference to the Company's Report on Form 8-K filed with the Commission on October 16, 2002.                                                            

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